The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.50% for the third time in a row. This is in line with the market expectations as the central bank continues to balance between inflation and growth.

The RBI’s monetary policy committee (MPC), has also decided to keep the policy stance unchanged as ‘withdrawal of accommodation’.

The Marginal Standing Facility Rate and Bank Rate remains unchanged at 6.75%, 

The three-day meeting of the MPC was held from 8 to 10 August.

GDP

The GDP growth forecast has been retained at 6.5% for FY24. 

- GDP forecast for FY24 is at 6.5% 

- GDP forecast for Q1FY24 at 8% 

- GDP forecast for Q2FY24 at 6.5%

- GDP forecast for Q3FY24 at 6%

- GDP forecast for Q4FY24 at 5.7%

India is contributing around 15% to global growth, said RBI Governor Shaktikanta Das.

Inflation

The CPI inflation forecast, however, has been raised to 5.4% from the earlier prediction of 5.1% for FY24. CPI inflation forecast for FY2023-24 has been raised to 5.4% from 5.1%.

- CPI inflation forecast for Q1FY24 is projected at 5.2%

- CPI inflation forecast for Q2FY24 raised to 6.2% from 5.2%

- CPI inflation forecast for Q3FY24 raised to 5.7% from 5.4% 

- CPI inflation forecast for Q4FY24 retained at 5.2%

CRR

The banks will have to maintain an incremental CRR of 10% on the increase in their NDTL between 19 May and 28 July, starting fortnight 12 August, Das announced.

The move is aimed at absorbing surplus liquidity, created due to several factors including the return of Rs 2,000 notes into the banking system.

Reset of interest rates

In order to strengthen consumer protection, the RBI has proposed to put in place a transparent framework for reset of interest rates on floating interest loans. 

The framework will require Regulated Entities to (i) clearly communicate with borrowers for resetting the tenor and/or EMI; (ii) provide options for switching to fixed rate loans or foreclosure of loans; (iii) disclose various charges incidental to the exercise of the options; and (iv) ensure proper communication of key information to borrowers.

Offline payments in UPI

The RBI has proposed conversational payments in UPI. Offline payments in UPI will be introduced using near field tech via UPI Lite. The transaction limit for small value payments in offline mode has been enhanced to Rs 500 from Rs 200, Das said.

Withdrawal of Rs 2,000 notes

On withdrawal of the Rs 2,000 note, Das said it is a temporary measure. Once the withdrawal is complete, there will be "adequate liquidity" in the system, he added. 

On 19 May, the RBI called for the withdrawal of  Rs 2,000 denomination banknotes from circulation and said that all the notes must be deposited in banks or exchanged before 30 September.

The RBI Governor today announced the third bi-monthly policy for FY24.