The RBI policy rate REPO is now at its highest level since August 2018

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Wednesday (December, 7) hiked the repo rate by 35 basis points (bps) to 6.25 percent with immediate effect, RBI Governor Shaktikanta Das announced.

The RBI governor further announced that the MPC decided to remain focused on the withdrawal of accommodation and added that the standing deposit facility (SDF) rate stands adjusted to 6.00 percent and the marginal standing facility (MSF) rate and the Bank Rate to 6.50 percent.

Commenting on India’s economic growth, Das said the growth is supported by rural, manufacturing, and services sectors. He said that the RBI’s GDP growth forecast for the current financial year (FY23) is seen at 6.8 percent from the previous estimate of 7 percent, Growth forecast for Jan-Mar 2023 lowered to 4.2%

The revised policy rates are as under.

SDF is the new floor for policy rates introduced by RBI. The SDF rate is applied for which banks park their excess funds with the RBI without any collateral. Although, the 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.