RBI MPC Meeting HIGHLIGHTS: Shaktikanta Das-led MPC keeps repo rate, GDP projection on hold, tweaks inflation forecasts

RBI raises per transaction limit for UPI Lite by 2.5 times to Rs 500 

The RBI proposes to increase the per transaction payment limit to Rs 500 for UPI Lite in offline mode. Currently, limits of Rs 200 per transaction and an overall Rs 2,000 per payment instrument have been prescribed by the RBI for small value digital payments in offline mode.

Read more on RBI's move on UPI Lite here

RBI MPC Meeting LIVE | Change in RBI's inflation outlook quite significant, says Bank of Baroda's Madan Sabnavis

Madan Sabnavis, Chief Economist at Bank of Baroda, points out that while the RBI has expectedly not changed the repo rate or stance, there has been a change in its inflation outlook quite significantly. "Interestingly, the RBI has increased the forecast to 5.4 per cent from 5.1 per cent with the reading for the second quarter inflation seen crossing the six per cent mark. "This is indicative that for the present calendar year, there is no probability of a rate cut... The introduction of an incremental CRR, though on a temporary basis, will impound resources of banks and have an upward impact on market rates. While there will still be surpluses in the market, the concept of impounding of resources will exert upward pressure on sentiment and hence interest rates," he says.

"We can assume that this will be reversed before the festival/busy season as the RBI could have gone in for OMO to permanently take out liquidity from the system.”

Rate-sensitive stocks continue to stage mixed moves after RBI announcements

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RBI MPC Meeting LIVE | Shaktikanta Das says India’s overall strong macro fundamentals have laid foundations for sustainable growth

Here are some of the key things he points out about the domestic and global economies: 

• Indian economy exuding enhanced strength & stability despite massive shocks to global economy in recent years
• Our economy has continued to grow at a reasonable pace
• India uniquely placed to benefit from ongoing transformational shifts in global economy in the wake of geopolitical realignments & technological innovations
• Global economy continues to face daunting challenges of
  • elevated inflation
  • high levels of debt
  • tight and volatile financial conditions
  • continuing geopolitical tensions
  • fragmentations
  • extreme weather conditions
• Global growth likely to remain low by historical standards this year and for next few years
• External factors likely to impinge on growth prospects of most major advanced & emerging economies
• India expected to withstand these external headwinds far better than many other countries
• Overall economic activity momentum in India remains positive
• Aggregate demand conditions remain buoyant

RBI Policy LIVE Updates | India has made good progress in sustaining growth momentum, inflation has moderated but job still not done, says Shaktikanta Das  

"Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties," says RBI Governor Shaktikanta Das.

He reiterated that the central bank remains committed to aligning consumer inflation to its four per cent target "on a durable basis".

Read more on RBI August policy review 

RBI Governor announces temporary measure to absorb surplus liquidity in system

With effect from Aug 12, scheduled banks will maintain an incremental cash reserve ratio (I-CRR) of 10 per cent on the increase in their net demand and time liabilities (NDTL) between May 19 and July 28, a measure intended to absorb surplus liquidity in the system, he says. 

Das also mentions that the key factors behind the excessive liquidity include the return of Rs 2,000 notes to banking system. "This is purely a temporary measure for managing the liquidity overhang," he says. 

The existing cash reserve ratio (CRR) remains unchanged at 4.5 per cent, he reiterates.  

RBI Monetary Policy LIVE | Assessing the future trajectory of inflation is a continuous process, says Shaktikanta Das

"We have a choice to modify our inflation projections in every meeting of MPC, if warranted, in the interest of better guidance; or avoid frequent changes and revise them only on fewer occasions for simplicity of presentation," says the RBI Governor.

RBI MPC Meeting LIVE | Shaktikanta Das says vegetable prices may see a significant correction in a few months

Here are some of the highlights of what the RBI Governor said on vegetable prices and food inflation: 

• Prospects of kharif crops have brightened thanks to monsoon progress (planting activity in the kharif season takes place from June to September in India; harvest begins around October)
• Uncertainties remain on domestic food price outlook due to sudden weather events, possible El Nioo conditions from August
• Global food prices exhibiting a hardening bias on renewed geopolitical tensions

RBI Policy | Shaktikanta Das says Rupee has remained stable since January 2023

The RBI Governor highlights that the country's forex reserves have crossed the $600 billion level.

RBI Monetary Policy LIVE | Surplus liquidity has risen in system due to withdrawal of Rs 2,000 banknotes, dividend to government, says Shaktikanta Das

RBI Policy | Domestic financial sector has been stable and resilient, says Shaktikanta Das

This is being reflected in the economy's sustained growth numbers, the RBI Governor adds. 

RBI Policy | Cash reserve ratio (CRR) remains unchanged at 4.5% 

The cash reserve ratio is the proportion of a commercial bank's total deposits that it is required to maintain as liquid cash.

RBI Policy LIVE Updates | Shaktikanta Das says core inflation has softened by over 100 bps from recent peak

RBI Governor Shaktikanta Das says that inflation excluding food and fuel — also known as core inflation — has eased by more than 100 basis points from its peak in January 2023. 

RBI tweaks inflation forecasts

The Monetary Policy Committee now pegs inflation at 6.2 per cent in Q2, instead of 5.2 per cent, and at 5.7 per cent in Q3, instead of 5.4 per cent earlier.

RBI revises consumer inflation forecast for 2023-24 to 5.4% from 5.1%

Industry stakeholders react to RBI MPC decision 

Industry stakeholders react to RBI MPC decision 

"RBI’s decision to keep the repo rate unchanged for two consecutive times reflects an improvement in the country’s economic fundamentals and confidence in India’s economic growth. This decision will positively impact residential and commercial segments. However, even after hitting the pause button, the current interest rate is already at its peak in the last four years. We are sure RBI is aware of it and will consider it in its next review meet," noted Mohit Goel, MD, Omaxe. 

RBI pegs GDP growth at 6.6% for first quarter of 2024-25

RBI hits pause on repo rate, maintains GDP growth projection for 2023-24 at 6.5%

Image: RBI

BREAKING | RBI Governor Shaktikanta Das announces status quo on repo rate

Here's how rate-sensitive stocks fare ahead of the RBI announcements

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As of June policy, RBI projects consumer inflation at 5.1% in 2023-24

The Monetary Policy Committee estimates inflation at 4.6 per cent in Q1, 5.2 per cent in Q2, 5.4 per cent in Q3 and 5.2 per cent in the final quarter of the year ending March 2024. 

Image: Reuters 

Nifty, Sensex begin day in the red as investors await MPC meeting outcome; rate-sensitive stocks a mixed bag

Indian equity benchmarks suffer minor losses ahead of the RBI's policy statement, due at 10 am. The Sensex declines as much as 237.7 points or 0.4 per cent to 65,758.2 in intraday trade so far and the Nifty slips to as low as 19,568.4, down 64.2 points or 0.3 per cent from its previous close.

Rate-sensitive stocks — or stocks belonging to spaces sensitive to changes in benchmark interest rates — are a mixed bag ahead of the release of the outcome of the RBI's August policy review.  

Follow this link to catch latest updates on Dalal Street

Bank of Baroda's Madan Sabnavis expects a status quo on RBI policy today

"Inflation, though lower than five per cent in June, is expected to come closer to six per cent in July. The prices of vegetables and pulses will continue to exert upward pressure on food inflation," says Madan Sabnavis, Chief Economist at Bank of Baroda.

He also points out that the RBI's projection of 8 per cent GDP growth in the first quarter indicates stability. Official quarterly data on the country's GDP is due at the end of the month.

"There is, therefore, no compelling reason to spur growth presently. Hence, the repo rate will remain unchanged till the end of the calendar year. Besides, the Fed has indicated a possible hike in the future, and treasury yields have moved up. Further, with liquidity being comfortable, the stance of withdrawal of accommodation will remain. We expect no change in inflation and GDP forecasts," Sabnavis adds.  

Economists & the common man to track RBI's commentary on vegetable prices closely

Wild swings in tomato prices over the past few weeks have fuelled concerns about inflation once again. Several restaurants in the country have already cut back on tomatoes in their popular dishes after prices surged more than 500 per cent to record highs.

Image: Reuters

What has made tomato dearer? Monsoon rains disrupted supplies at a time when seasonal production was typically low.

Repo rate stands at 6.5% ahead of August review 

Here's a look at the key policy rates at present: 

• Policy repo rate: 6.5%
• Standing deposit facility rate: 6.25%
• Marginal standing facility rate: 6.75%
• Bank rate: 6.75%
• Fixed reverse repo rate: 3.35%

What is repo rate?

With RBI all set to announce its rate decision in about two hours from now, here's what you should know about the benchmark lending rate. Here's what it really is and how it impacts you:

The repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks, not to be confused with the reverse repo rate which is the rate at which commercial banks lend money to the central bank. 

The repo rate is reviewed, and, hence revised, from time to time to align the supply of money in the economy with the RBI's targets for macroeconomic indicators such as GDP and inflation. If the central bank wants to make more money available in the system, it lowers the repo rate, and vice versa.

Since the repo rate determines the cost of funds for commercial banks, it impacts the products you avail from these lenders such as home loans and auto loans. 

Inflation, by definition, is the rate of increase in prices. For instance, consumer inflation, determined by the Consumer Price Index, determines the rate of increase in the price the consumer pays for a basket of items including vegetable, fruits, oils, milk and certain other food items, health, education, clothing, footwear and personal care.

Read more on what repo rate is and why it matters

Will MPC revise inflation projections today?

According to the Zee Business poll, 85 per cent of economists expect the RBI to tweak its forecasts for consumer inflation in the country in the August 10 policy. 

Will RBI Governor Shaktikanta Das-led MPC revise its GDP estimates today?

Again, 85 per cent of the economists polled by Zee Business expect no change in the RBI's GDP projections for the economy in its August 10 policy. Currently, the RBI projects real GDP growth in the economy at 6.5 per cent for the year ending March 2023. Here's the break-up:

• Q1: 8.0%
• Q2: 6.5%
• Q3: 6.0%
• Q4: 5.7%

85% of economists polled by Zee Business expect a policy easing cycle to begin after February 2024 review 

According to a Zee Business poll, 85 per cent of the economists expect rate cuts to begin after the February 2024 policy review, and the remaining 15 per cent see policy easing starting in the February policy itself. 

Catch what other economists say

Here's what you can expect in MPC policy statement today

All of the economists polled by Zee Business expect no change in the repo rate in the August 10 statement. In fact, none of them expect a rate hike in the next policy review as well. 

Image: Reuters

Read more on what to expect in August RBI policy statement

A summary of repo rate revisions over the past few months

The Monetary Policy Committee (MPC) — the RBI's benchmark interest rate-deciding panel — raised the benchmark lending rate six times between May 2022 and February 2023. In its June meeting, the MPC decided to keep the rate on pause.