The Monetary Policy Committee (MPC) met on the 3rd, 4th, and 5th of April 2024 and decided to keep the policy repo rate at 6.50 percent, other key policy rates also remained unchanged for the 6th straight time.
RBI also left the policy stance unchanged with a focus on the withdrawal of accommodation. Withdrawal of accommodation refers to a policy of reducing the money supply in the system. This is done to control inflation while supporting growth. This decision also has implications for banks and financial institutions, particularly concerning lending rates like home loan interest rates, which are linked to the RBI’s repo rate. A stable repo rate signals consistency in interest rates for borrowers, assuring homebuyers regarding steady loan interest rates, beneficial for both new loans and existing ones with floating rates. Stable interest rates not only enhance affordability for potential homebuyers but also foster consumer confidence, thereby sustaining demand in the real estate market.
RBI Governor Shaktikanta Das said that economic activity is expected to continue in fiscal year 2024-25 also. GDP forecast for Q1FY25 GDP growth target cut to 7.1% from 7.2% earlier. Q2FY25: GDP growth target rose to 6.9% from 6.8% earlier. Q2FY25: GDP growth target raised to 6.9% from 6.8% earlier, Q4FY25: GDP growth target raised to 7% from 6.9% earlier.
RBI has forecast India’s CPI-based retail inflation at 4.5% for FY25. Here is a detailed inflation forecast:
Q1FY25: CPI estimates cut to 4.9% from 4.5% earlier, Q2FY25: CPI estimates cut to 3.8% from 4% earlier, Q3FY25: CPI estimates unchanged at 4.6%, Q4FY25: CPI estimates cut to 4.5% from 4.7% earlier
The current reserve ratios and policy rates which remain unchanged are as follows.
| CRR (Cash Reserve Ratio) (I-CRR) of 10 per cent on the increase in NDTL From August 2023. | 4.50% |
| SLR (Statutory Liquidity Ratio) | 18.00 % |
| Repo Rate | 6.50% |
| Standing Deposit facility (SDF)* | 6.25% |
| Reverse Repo Rate | 3.35% |
| Bank Rate | 6.75% |
| MSF Rate (Marginal Standing Facility Rate) | 6.75% |
*SDF is the new floor for policy rates introduced by RBI in April 2022, as a mechanism to curb inflation by absorbing liquidity. The SDF rate is applied for which banks park their excess funds with the RBI without any collateral. Although, earlier system of reverse repo rate will remain as part of RBI’s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time, according to RBI’s announcement. This move of RBI makes the reverse repo rate redundant for now.
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