June 7, 2024
New Delhi, India
Key Highlights from RBI MPC Meeting June 2024
The Reserve Bank of India (RBI) concluded its first Monetary Policy Committee (MPC) meeting since the Lok Sabha Elections 2024, announcing several significant decisions. The repo rate remains unchanged at 6.50%, marking the eighth consecutive term without a change, as the RBI focuses on maintaining economic stability.
Major Announcements
- Repo Rate Unchanged: The RBI has maintained the key interest rate (repo rate) at 6.50%. The last adjustment was a hike in February 2023.
- GDP Growth Forecast: The RBI raised its GDP growth forecast for FY25 to 7.2%, up from the previous 7%. The quarterly projections are:
- Q1: 7.3%
- Q2: 7.2%
- Q3: 7.3%
- Q4: 7.2%
- Inflation Forecast: The inflation forecast for FY25 is retained at 4.5%, with quarterly projections as follows:
- Q1: 4.9%
- Q2: 3.8%
- Q3: 4.6%
- Q4: 4.5%
Policy Stance and Committee Votes
The MPC decided by a 4:2 majority to continue with the stance of ‘withdrawal of accommodation’ to control inflation and support economic growth.
Developmental and Regulatory Policies
- Bulk Deposit Threshold: The threshold for bulk deposits in Scheduled Commercial Banks, Small Finance Banks, and Local Area Banks has been raised from ₹2 crore to ₹3 crore.
- Export and Import Regulations: Rationalisation of regulations under the Foreign Exchange Management Act (FEMA) to streamline processes.
- Digital Payments Intelligence Platform: Establishment of a platform to utilize advanced technologies to reduce payment fraud risks.
- Auto-Replenishment Features: Inclusion of recurring payments for Fastag, National Common Mobility Card (NCMC), and UPI Lite wallets under the e-mandate framework.
Foreign Exchange Reserves and Current Account Deficit
- Foreign Exchange Reserves: India’s forex reserves reached a new high of $651.5 billion as of May 31, 2024.
- Current Account Deficit: Expected to remain within a sustainable level for FY25.
Broader Economic Context
The RBI‘s policy announcement comes amid a period of global economic adjustments, with European shares fluctuating and US jobs data influencing Federal Reserve policy expectations. The focus on maintaining a stable repo rate while adjusting growth forecasts reflects the RBI’s strategy to navigate domestic economic conditions and external uncertainties.
Conclusion
The RBI’s decision to keep the repo rate steady while increasing the GDP growth forecast indicates a balanced approach to fostering economic growth and managing inflation. The outlined developmental and regulatory policies aim to enhance the financial ecosystem and support India’s economic objectives for FY25.
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