RBI MPC meeting: Reserve Bank of India (RBI) governor Sanjay Malhotra on Wednesday, April 8, announced a status quo on repo rate and monetary policy stance, citing increased inflationary risks due to geopolitical developments, even as the fundamentals of the Indian economy remain on a strong footing at the current juncture.
The Monetary Policy Committee (MPC) of the RBI decided to keep the repo rate unchanged at 5.25%, and maintain the policy stance as “neutral”.
RBI monetary policy: Key highlights
1. Repo rate, policy stance unchanged for the second consecutive meeting
The central bank maintained the repo rate and policy stance unchanged for the second consecutive policy meeting in April. In February as well, the RBI had held rates steady and maintained a neutral stance after cutting the repo rate by 25 basis points in December last year.
With the repo rate at 5.25%, the standing deposit facility (SDF) rate, at which banks can deposit excess funds with the RBI, remains at 5%. Moreover, the marginal standing rate, or the MSF rate- the rate at which banks can borrow money from the RBI during an emergency- remains at 5.50%.
“The MPC voted unanimously to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25%. Consequently, the standing deposit facility (SDF) rate remains at 5%, and the marginal standing facility (MSF) rate and the Bank Rate are at 5.50%. The MPC also decided to continue with the neutral stance,” Governor Malhotra said.
2. Inflation forecast
RBI expects inflation to stay within its tolerance band of 2-6% in FY27. The central bank projected Consumer Price Index (CPI)-based inflation for FY27 at 4.6%. Inflation for Q1FY27 is projected at 4%, which can inch up to 4.4% in Q2 and may further advance to 5.2% in Q3FY27. The central bank projected Q4FY27 inflation at 4.7%. Core inflation is projected at 4.4 per cent.
“Recent spikes in energy prices due to the conflict have emerged as a risk. The food price outlook remains comfortable in the near term, with robust rabi production, adequate reservoir levels, and comfortable buffer stocks of food grains. The likely emergence of El Niño conditions could pose a risk,” said the RBI Governor.
3. GDP growth forecast
The central bank kept the FY26 growth forecast unchanged at 7.6%, but expects GDP prints to ease to 6.9% in FY27. GDP growth for Q1FY27 is projected at 6.8%, while for Q2, it could be 6.7%. For Q3FY27 and Q4FY27, the RBI projected GDP growth at 7% and 7.2%, respectively.
The RBI Governor underscored that the further escalation and wider spread of the US-Iran conflict, heightened volatility in global financial markets, and weather-related events weigh on the domestic growth outlook.
4. Measures to promote ease of doing business
The RBI proposed three measures to promote ease of doing business.
(i) To facilitate better utilisation of the Bank Board’s time, after a comprehensive review of extant instructions, the RBI governor proposed a revision and rationalisation of the matters requiring its attention.
(ii) The RBI governor said that the central bank had recently undertaken a detailed exercise to consolidate over 9000 regulatory instructions into 238 Master Directions. A similar consolidation exercise has been completed for all its supervisory instructions.
(iii) To facilitate ease of doing business by MSMEs, the RBI proposes to dispense with the requirement of due diligence while onboarding them on TReDS platforms.
5. Money market to include additional categories of non-bank entities
The RBI Governor proposed permitting certain additional categories of non-bank entities to further develop the money market.
“At present, only banks and standalone primary dealers (SPDs) are eligible to participate in this market. We are also enhancing the borrowing limit of SPDs in the term money market,” the RBI Governor said.
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