Details: The Reserve Bank of India (RBI) Governor Shaktikanta Das announced that the repo rate, which is the rate at which the central bank lends short-term loans to banks, will remain unchanged at 6.5%.
GDP Growth Projection Steady
FY25 Projection: The RBI has maintained its real GDP growth projection for the fiscal year 2025 at 7.2%.
Balanced Inflation and Growth
Remarks by Governor: Governor Das stated that inflation and growth are evolving in a balanced manner, but emphasized the need to stay vigilant regarding food prices.
Monetary Policy Committee Voting
Outcome: In the Monetary Policy Committee (MPC) meeting, four members voted to hold the rates steady, while two members were against.
Press Conference
Details: Governor Das will hold a press conference at 12 p.m. on Thursday, streamed live on the RBI’s X handle.
CPI Inflation Forecast
FY25 Forecast: The RBI has adjusted its CPI inflation forecast for FY25 to 4.4%. A relief in retail inflation is expected due to the southwest monsoon.
Impact of Agriculture on Consumption
Retail Inflation Projection: Retail inflation is projected at 4.5% for FY25. Improved agricultural activities, assuming normal monsoon conditions, are expected to boost rural consumption.
High Food Prices: High food prices have slowed the process of disinflation in Q1FY25 and could impact household inflation expectations.
Rupee and Structural Liquidity Issues
Rupee Status: The Indian Rupee remained largely stable in August.
Liquidity Concerns: Governor Das warned banks to be cautious about declining deposits, which could expose them to structural liquidity issues. He also expressed concern over the rise in top-up home loans, advising lenders to take remedial actions.
Current Account Deficit and Forex Reserves
Manageable Deficit: The Current Account Deficit is expected to remain manageable.
Forex Reserves: India’s forex reserves reached a record high of $675 billion as of August 2.
Proposals and Initiatives
Digital Lending Apps: The RBI proposed creating a public repository of digital lending apps to curb unauthorized players.
UPI Tax Payment Limit: The tax payment limit through UPI has been increased from ₹1 lakh to ₹5 lakh.
Reporting Frequency: The frequency of bank reporting to Credit Information Companies will be increased to every fortnight from the current once-a-month.
Cheque Clearance: The RBI has proposed speeding up the clearance of cheques to just a few hours.
Industry Feedback
Anuj Puri's Comments: Anuj Puri, Chairman of Anarock Group, stated that keeping the repo rates unchanged at 6.5% aligns well with recent announcements on indexation benefits. This decision provides stability in borrowing costs, encouraging more homebuyers and potentially boosting home sales, especially in the affordable housing segment.
This comprehensive update from the RBI covers critical aspects of India's monetary policy, providing valuable insights into the country's economic outlook.