RBI keeps interest rate unchanged for ninth time in a row

The Reserve Bank of India kept the benchmark interest rate and stance unchanged for the ninth straight policy meeting. The Monetary Policy Committee (MPC) kept the benchmark repurchase or repo rate unchanged at 6.50 per cent. Four out of the six members of MPC voted in favour of the rate decision. The panel decided to retain a policy stance at “withdrawal of accommodation” to help bring inflation towards its 4 per cent target.

Inflation climbed to 5.08 per cent in June, mainly due to the food component. RBI Governor Shaktikanta Das said food inflation remains “stubbornly” high, and monetary policy must continue to be disinflationary.

The MPC could have ignored high food inflation if it was transitory, but in an environment of persisting high food inflation, it has to remain vigilant.

The RBI retained India’s GDP growth forecast at 7.2 per cent and headline CPI inflation at 4.5 per cent for the current fiscal 2024-25. Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said that with growth remaining strong, the MPC still has room to hold on to the policy stance to confirm the disinflationary trend.

Radhika Rao, Executive Director and Senior Economist, DBS Bank said policy guidance reinforced that domestic considerations will be prioritised.

The Governor warned of excess leverage through retail loans and growing top-up housing loans and announced measures including raising the limit for tax payments through UPI from Rs 1 lakh to Rs 5 lakh per transaction, clearing of cheques within a few hours, and introducing a facility of delegated payments in UPI.