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Analyzing the implications of the RBI’s latest policy, Anitha Rangan, Economist at Equirus, said, “As widely expected, RBI has held its policy rate at 6.5 per cent, while announcing a CRR cut of 50 bps in two tranches of 25 bps each over the next two fortnights. By doing this, the RBI has provided adequate liquidity and eased the short term borrowing, while keeping longer term well anchored. Alongside the growth outlook of 7.2 per cent for FY25 has been taken down to 6.6 per cent, with the recent slowdown in growth. Inflation outlook has however been revised upwards to 4.8 per cent for FY25 from 4.5 per cent with 4 per cent reaching in Q2 of FY26.” Road the full article: https://lnkd.in/dqZYC8eu

*RBI Maintains Status Quo on Interest Rates: What It Means for You* The RBI has decided to keep its key interest rates unchanged in its latest Monetary Policy Committee (MPC) meeting. This means that the repo rate, the rate at which the central bank lends money to commercial banks, remains at 6.5%. Additionally, there has been no change in the RBI's stance on monetary policy, which remains at 'Withdrawal of accommodation.' This essentially means that the RBI is not actively looking to lower interest rates at the moment. The RBI Governor's positive outlook on the economy suggests that there is currently minimal incentive for the central bank to cut interest rates. Instead, the RBI seems to be waiting for cues from the US Federal Reserve, particularly regarding any potential rate cuts. This indicates that we might not see any changes in policy rates until at least the second half of 2024. This decision also marks a significant milestone: it will soon be the longest period in four years without a rate cut by the RBI. Over this period, the central bank has either maintained interest rates or, in some cases, even raised them. So, what does this mean for you as a consumer or investor? Essentially, it indicates a period of stability in borrowing and lending rates. If you're planning to take out a loan or invest in fixed-income instruments, it's essential to keep an eye on future developments in RBI's monetary policy, especially regarding any changes in interest rates.

RBI keeps repo rates unchanged & cuts CRR to 4% 10 key points in the monetary policy today. 1) Repo Rate remains unchanged at 6.5% 2) Standing Deposit Facility (SDF) remains unchanged at 6.25% 3) Marginal Standing Facility (MSF) remains unchanged at 6.75% 4) Growth has slowed down, but seems to be bouncing back 5) Real GDP growth for FY25 is now projected at 6.6%, 6) Expected growth rates - Q3 at 6.8% and Q4 at 7.2% 7) CRR cut to 4.0% from 4.5% to ensure no systemic liquidity stress due to tax outflows in the near future 8) CRR cut to release about Rs 1.1 lakh crore in the banking system 9) Inflation expectations raised to 4.8% from 4.5% 10) Increase in the interest rate ceilings on FCNR(B) deposits, to attract inflows ----- Peeyush Chitlangia, CFA I help you decode complex financial and macro concepts

RBI Monetary Policy 2024 Highlights: Key Announcements and Market Reactions :👇 Repo Rate Stays at 6.5% The Reserve Bank of India (RBI) has maintained the benchmark repo rate at 6.5%, marking the 11th consecutive meeting with no changes. RBI Governor Shaktikanta Das confirmed that the Monetary Policy Committee (MPC) continues to adopt a ‘Neutral’ stance. CRR Reduced by 50 bps to 4% The Cash Reserve Ratio (CRR) has been lowered by 50 basis points to 4%. This move is expected to infuse additional liquidity into the banking system, encouraging more credit availability. This marks the first CRR cut since March 2020, also reduction will occur in two phases, with a 25 basis point cut in each tranche. Significant Boost for the Banking Sector Introduction of Secured Overnight Rupee Rate (SORR) To improve the credibility of interest rate benchmarks and foster growth in the derivatives market, the RBI will introduce a new benchmark—the Secured Overnight Rupee Rate (SORR). This will be based on secured money market transactions such as overnight repo and TREPS. SFBs Allowed to Offer Credit Lines via UPI Small Finance Banks (SFBs) can now extend pre-approved credit lines through UPI, a move designed to promote financial inclusion and benefit customers who are new to credit. Inflation Forecasts Raised for FY25 The RBI has raised its Consumer Price Index (CPI) inflation projection for FY25 to 4.8% (from 4.5%). Revised forecasts are: Q3 FY25: 5.7% (up from 4.8%) Q4 FY25: 4.5% (up from 4.2%) Q1 FY26: 4.6% (up from 4.3%) Q2 FY26: 4% GDP Growth Forecast Lowered The GDP growth projection for FY25 has been reduced to 6.6% (from 7.2%). Revised growth estimates include: Q3 FY25: 6.8% (down from 7.4%) Q4 FY25: 7.2% (down from 7.4%) Q1 FY26: 6.9% (down from 7.3%) Q2 FY26: 7.3% Market Reaction : Indian equity markets, including Sensex and Nifty 50, responded positively to the CRR cut, reflecting investor optimism.

Very helpful crisp analysis of RBI monetary policy...

Key takeaways from the RBI MPC Meeting FY 2024-25 (August 6- August 8, 2024): Repo Rate Unchanged: MPC decided by a majority of 4:2 to keep the Repo Rate unchanged at 6.5 percent for the 9th consecutive time. Steadfast MPC Stance: The MPC also resolved to stay focused on the withdrawal of accommodation to ensure that inflation gradually aligns with the target while continuing to support growth. Projected CPI Inflation and GDP Growth: CPI inflation for 2024-25 is forecasted at 4.5 percent, with real GDP growth projected at 7.2 percent. MPC Reaffirms Focus on Inflation Target Amid Steady Growth: The MPC deemed it crucial for monetary policy to remain consistent while closely monitoring inflation trends and associated risks. Global Economy Shows Steady Growth: The global economic outlook shows steady but uneven growth, with financial markets experiencing volatility. Since the last meeting, bond yields and the dollar index have softened. Domestic Economic Activity: Domestic economic activity is resilient, with strong growth in kharif output, manufacturing, and services. Rural and urban spending boost demand, while fixed and private investments rise with government support and expanding bank credit. Current Inflation Trends: Headline CPI inflation rose to 5.1% in June 2024 due to higher-than-expected food prices. Core inflation hit historic lows in May and June. Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5%. Additional measures discussed in the meeting: Public Repository of Digital Lending Apps: The Reserve Bank plans to create a public repository of digital lending apps (DLAs) used by its regulated entities to curb issues from unauthorized DLAs. Regulated entities will report and update their DLA information in this repository, helping consumers identify unauthorized lending apps. Reporting Frequency of Credit Information to Credit Information Companies: The proposal to increase credit information reporting to CICs from monthly to fortnightly or shorter will speed up updates for borrowers and enhance lenders risk assessments. Increasing Transaction Limits for Tax Payments via UPI: The UPI transaction limit for tax payments is being increased from ₹1 lakh to ₹5 lakh, simplifying tax payments for consumers. Introduction of 'Delegated Payments' via UPI: The proposed "Delegated Payments" feature will allow a primary user to permit a secondary user to make UPI transactions up to a set limit from the primary user's bank account, enhancing digital payment accessibility and use. Ongoing Cheque Clearing: The proposal to implement continuous clearing with 'on-realization-settlement' in CTS will shorten the cheque-clearing cycle from up to two days to a few hours on the day of presentation, speeding up payments for both payers and payees. #rbipolicy #fiscalpolicy #reporate #debtmarket #thefixedincome #mpcmeeting

Today, the RBI Governor announced the MPC's decision that the Policy Repo Rate would remain unchanged. However, the Cash Reserve Ratio will be reduced by 50 bps over two tranches to increase liquidity. Let us understand the reason behind this decision and how not changing the base rate and decreasing the CRR will help boost economic productivity while also keeping inflation in check. 🔍 What is CRR? Banks are required to hold a portion of their deposits with the central bank as reserves for emergencies. This portion is termed the CRR. Lowering it means banks can lend more or invest those funds instead of parking them as reserves. How does the CRR Impact the Economy? 1️⃣ More Liquidity for Banks: Banks now have more money to lend as the reserve requirement is decreased, increasing the flow of credit in the economy. Businesses and individuals can access loans more easily. 2️⃣ Interest Rates May Soften: Even without a change in the repo rate, increased liquidity could drive competition among banks, nudging loan and deposit rates downward. 3️⃣ Economic Activity Gets a Boost: With easier access to credit, businesses can invest in growth, and consumers may spend more on homes, cars, and other goods. This fuels demand and stimulates growth. Mind that the base rate for loans has not decreased. But instead, the volume of loans will be increased. So credit will be diverted towards productive sectors. 4️⃣ No Change to Policy Stance: Lowering the CRR allows the central bank to inject liquidity without changing the repo rate, maintaining a cautious stance on inflation while supporting growth. 🔑 Why Does the Central Bank Choose This Path? 🔸 To tackle liquidity shortages in the banking system. 🔸 To boost credit flow in specific sectors like SMEs or real estate. 🔸 To counter external shocks, such as tighter global monetary conditions. 🔸 To keep the rising inflation in control while taking care of the overall demand and the growth in the economy does not stagnate. 💭 My Take? I personally expected the RBI to cut base policy rates because of the global pressures and decreasing economic growth. But as the inflation is also out of the range towards the higher side, cutting the policy rates would mean further increasing the risk of higher inflation. So, I think the decision to keep the base rate unchanged and to decrease the CRR is very good in the sense that it will help boost the demand and growth in the economy while also ensuring that inflation remains in a controllable range. What do you think about this approach to monetary policy? Does it strike the right balance between growth and inflation control? Share your thoughts in the comments. #RBI #RBIPolicy #MonetaryPolicy #Inflation #Economy #FinancialAwareness #FinancialLiteracy #Economics #Finance

RBI Monetary policy committee meeting 2024 highlights: Today, December 6, the Reserve Bank of India (RBI) released its fifth bi-monthly monetary policy for FY25. For the eleventh consecutive meeting, the six-member Monetary Policy Committee (MPC), chaired by RBI Governor Shaktikanta Das, voted by a majority of 4 to 2 to maintain the benchmark repo rate at 6.5%, maintain the monetary policy stance of "Neutral," and remain unwaveringly focused on a long-term alignment of inflation with the target while promoting growth. Additionally, the cash reserve ratio (CRR) was cut by 50 basis points (bps) to 4% by the rate-setting panel. Highlights of the RBI MPC: Important lessons learned from the December RBI Policy Highlights of the RBI MPC: The following are the main conclusions from today's December RBI Policy: 1] Policy Actions: The 6.5% repo rate remained unchanged. The policy's "Neutral" attitude remains unaltered. SDF rate remained constant at 6.25%. MSF rate remained same at 6.75%. The bank rate remains at 6.75%. By a vote of 4 to 2, MPC members decided to keep things as they were. 50 bps to 4% CRR drop Two tranches of ₹1.16 lakh crore would be released into the banking sector by the CRR cut. 2. GDP Growth Projections: Estimates for FY25 GDP growth dropped from 7.2% to 6.6%. Estimates of quarterly GDP growth are FY25: Reduced from 7.2% to 6.6% Q3FY25: Reduced from 7.4% to 6.8% Q4FY25: Reduced from 7.4% to 7.2% Q1FY26: Reduced from 7.3% to 6.9% Q2FY26: Forecast for CPI Inflation at 7.3% 3. The CPI inflation target for FY25 was raised from 4.5% to 4.8%. The forecasts for quarterly inflation are FY25: Raised to 4.8% from 4.5% Q3FY25: Raised to 5.7% from 4.8% Q4FY25: Raised to 4.5% from 4.2% Q1FY26: Raised to 4.6% from 4.3% Q2FY26: At 4% 4] Additional measures: The FX-Retail platform will be connected to NPCI's Bharat Connect platform. The Secured Money Markets benchmark, the Secured Overnight Rupee Rate (SORR), will be introduced. Collateral-free agricultural loans would now be worth ₹2 lakh per borrower instead of ₹1.6 lakh. Through the UP, small finance banks are allowed to offer pre-approved loan lines. Forming a committee to Suggest the Financial Sector's Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) Launch of Mule Hunter and the Introduction of Podcasting as an Extra Communication Channel. An AI method for locating mule bank accounts Launch of the Open Regulation Initiative "Connect 2 Regulate"

Key takeaways from the RBI MPC Meeting FY 2024-25 ( October 7- October 9, 2024): Repo Rate Unchanged: MPC decided by a majority of 5 out of 6 members to keep the Repo Rate unchanged at 6.5 percent for the 10th consecutive time. RBI Keeps SDF, MSF, and Bank Rate Unchanged: The standing deposit facility (SDF) rate remains steady at 6.25%, while the marginal standing facility (MSF) rate and the Bank Rate are unchanged at 6.75%. MPC Shifts to Neutral Stance: The MPC changed the monetary policy stance to ‘neutral’ and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth. Projected CPI Inflation and GDP Growth: CPI inflation for 2024-25 is forecasted at 4.5 percent, with real GDP growth projected at 7.2 percent. Global Growth: The global economy has shown resilience, despite downside risks from escalating geopolitical conflicts, geoeconomic fragmentation, financial market volatility, and high public debt. India’s GDP Growth: In India, real gross domestic product (GDP) grew by 6.7% in Q1 2024-25, fueled by private consumption and investment. Current Inflation Trends: Headline inflation dropped significantly to 3.6% and 3.7% in July and August, respectively, down from 5.1% in June. Food inflation is anticipated to ease by Q4 2024-25,  FPI and FDI Inflows Strengthen in 2024: Foreign portfolio investment (FPI) shifted from net outflows of $4.2 billion in April-May 2024 to net inflows of $19.2 billion between June and October 7, 2024. Foreign direct investment (FDI) flows also remained strong,  Additional measures: Responsible Lending Conduct: To safeguard consumer’s interests, banks and NBFCs are not permitted to levy foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned to individual borrowers for purposes, other than business. Discussion Paper on Capital Raising for UCBs: A Discussion Paper on Capital Raising Avenues for the Urban Co-operative Banking (UCB) sector will be released to gather feedback and suggestions from stakeholders, offering greater flexibility and opportunities for UCB to raise capital. Reserve Bank to Launch Climate Risk Data Repository: Climate change presents rising risks to the financial system, requiring robust risk assessments. To address data gaps, the Reserve Bank will create the Reserve Bank – Climate Risk Information System. UPI Increase of Limits: The per-transaction limit in UPI123Pay will be raised from ₹5,000 to ₹10,000, while the UPI Lite wallet limit will increase from ₹2,000 to ₹5,000, and the per-transaction limit from ₹500 to ₹1,000. Name Verification Feature for RTGS and NEFT Transfers: A name verification feature will be introduced for RTGS and NEFT which will allow remitters to confirm the beneficiary's name before transferring funds for safer transfers. #TheFixedIncome #RBIPolicy #RepoRate #MonetaryPolicy #GDP #Indianeconomy #Wearebondinvestors #Bonds #Finance #Economicgrowth

RBI Announced a Cash Reserve Ratio ( CRR ) Cut of 50 Bps from 4.5 % to 4. What is the Cash reserve ratio: It is the percentage of bank deposits that a bank must keep aside with RBI in the form of cash balance for the stability of the banking system. The bank does not get any Interest on CRR deployed. How does CRR cut impact the country? - The CRR Cut will increase the liquidity of 1.16 lakh crore into the banking system and boost economic growth. - It is also expected that the bank's Net Interest Margin will increase slightly if all the funds are deployed for credit. Why CRR Cut? - The liquidity in the banking system has tightened because of RBI's action to stabilise the rupee against the dollar. - Q2 FY25 GDP has lowered to 5.4 % which is seven quarter low. Other Key Takeaways from MPC : - Repo rate to be Unchanged at 6.5%. - FY25 GDP growth has been revised to 6.6% from 7.2% - The CPI Inflation target has been raised to 4.8% from 4.5%.