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Key takeaways from the MPC meeting : 1) Repo Rate: Maintained at 6.5% with a 5:1 majority, aiming to align inflation with targets while supporting growth. 2) SDF & MSF Rates: SDF rate at 6.25%, MSF and Bank rates at 6.75%. 3) GDP Forecast: Projected steady growth of 7% in Q2, 7.4% in Q3 and Q4, with a slight dip to 7.3% in Q1 of FY26. FY25 forecast remains at 7.2%. 4) Inflation: Projected at 4.5% for FY25, with quarterly figures of 4.1% (Q2), 4.8% (Q3), and 4.3% (Q1 FY26). 5) Indian Rupee: Continues to be the least volatile among global currencies. 6) Das’ Message to NBFCs: Urged banks and NBFCs to carefully assess their exposures. 7) FPI Flows: Shifted from net outflows to net inflows of $19.2 billion between June and October. 8) Current Account Deficit: Widened to 1.1% of GDP in Q1 FY25. 9) Responsible Lending: Banks and NBFCs cannot levy pre-payment penalties on floating rate loans to individuals for non-business purposes. 10) Urban Cooperative Banks (UCBs): Discussion paper on capital raising avenues to be issued for stakeholder feedback. 11) Climate Risk Assessment: RBI to launch the Reserve Bank Climate Risk Information System (RBris). 12) UPI Enhancements: UPI One Three Pay transaction limit raised to Rs 10,000; UPI Light wallet limit increased to Rs 5,000, with per-transaction limits up to Rs 1,000. 13) RTGS & NEFT: Beneficiary account name lookup facility to be introduced to reduce wrong credits and fraud. These highlights focus on growth, inflation control, financial stability, and enhancing digital payment systems.

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

Highlights of the Monetary Policy Statement, 2024-25:- Key Policy Rates: - Repo rate remains unchanged at 6.50%. - Standing Deposit Facility (SDF) rate is at 6.25%. - Marginal Standing Facility (MSF) rate and Bank Rate at 6.75%. - Policy stance remains neutral, focusing on aligning inflation with targets while supporting growth. Growth Projections: - Real GDP growth for 2024-25 is projected at 6.6%, with Q3 at 6.8% and Q4 at 7.2%. - For 2025-26, Q1 is projected at 6.9% and Q2 at 7.3%. Risks are balanced. Inflation Outlook: - CPI inflation for 2024-25 is projected at 4.8%, with Q3 at 5.7% and Q4 at 4.5%. - For 2025-26, Q1 is projected at 4.6% and Q2 at 4.0%. Risks are balanced. Liquidity Measures: - The Cash Reserve Ratio (CRR) is reduced to 4.0% of Net Demand and Time Liabilities (NDTL) in two 25-bps tranches (effective December 14 and December 28, 2024), releasing liquidity of approximately ₹1.16 lakh crore. Other Decisions: - Increase in interest rate ceilings on FCNR(B) deposits to attract more capital inflows (valid until March 31, 2025). - Proposal to link the FX-Retail platform with Bharat Connect for enhanced usability. - Introduction of a new interest rate benchmark, Secured Overnight Rupee Rate (SORR), based on overnight repo and TREPS. Agriculture and Financial Inclusion: - Limit for collateral-free agriculture loans raised from ₹1.6 lakh to ₹2 lakh to benefit small and marginal farmers. - Small Finance Banks are now permitted to extend pre-sanctioned credit lines through UPI, promoting financial inclusion for new-to-credit customers. Liquidity Management: The Reserve Bank will remain flexible and proactive in liquidity management to maintain orderly money market rates. The Monetary Policy Statement, 2024-25, demonstrates a balanced approach to sustaining economic growth while addressing inflationary pressures. By keeping the repo rate at 6.50%, the RBI emphasizes stability and a neutral stance. Reduction in CRR and liquidity measures aims to stimulate economic activity by injecting ₹1.16 lakh crore into the banking system. Projections of GDP growth (6.6%-7.3%) reflect optimism, while CPI inflation targets (4.8%-4.0%) suggest controlled price levels. #Financialmanagement #Equityinvestments #Derivativetrading #Equitytrading #Dhairyam

*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 Governor Shaktikanta Das said on August 8 that the Monetary Policy Committee (MPC) has decided to keep the benchmark interest rate unchanged at 6.5 percent for ninth time in a row. Here are the highlights from Das' speech: * RBI-led MPC decided by 4:2 to keep repo rate unchanged at 6.5 percent. The MPC decided by 4:2 to stay focused on withdrawal of accommodation, said Das. * Resilient and steady growth in GDP enables monetary policy to focus on inflation, said Das. * Without price stability high growth cannot be sustained.. * Inflation broadly on declining trajectory. * In Q3, substantial advantage of base effect may pull down overall inflation, said Das. * RBI Governor projected retail inflation at 4.5 percent during FY25 assuming normal monsoon. A degree of relief in retail inflation is expected from pickup in southwest monsoon, he said. * RBI keeps growth projection unchanged at 7.2 percent for current financial year. *Banks should mobilise more household financial savings.. * MPC cannot afford to look through persistently high food inflation as it may spillover, cannot and should not become complacent because core inflation has fallen considerably. * Decline in deposits may expose banks to structural liquidity issues; banks should be careful. * Expect current account deficit to remain manageable. * Indian financial system remains resilient, gaining strength from broader macroeconomic stability. * MPC has to be vigilant as country is witnessing persistently high food inflation: RBI Governor. * RBI will continue to be nimble and flexible in liquidity management operations. * RBI Governor Shaktikanta Das expressed concern over rising disbursals of top-up home loans, asked lenders to take remedial actions. * Inflation and growth evolving in balanced manner, though we need to remain vigilant on food prices front. * RBI raises frequency of reporting of banks to Credit Information Companies to a fortnight, as against once a month currently. Shaktikanta Das announced five additional measures: 1. Public repository of digital lending app: RBI has taken many measures for this ecosystem. More so, RBI proposes to create a public repository under a regulated entity, said Das. 2. Accurate credit info is key, Lenders report this to CIC every month. Now, this is to be done on fortnightly basis or at a shorter notice. Borrowers will benefit from faster update of their credit info. 3. RBI raises tax payment limit through UPI from Rs 1 lakh to Rs 5 lakh. 4. Propose delegated payment through UPI. 5. The clearing cycle of cheques is to be reduced from present two working days. Now, cheques will be cleared within few hours of being presented

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

New Post: Live RBI News : Highlights of the RBI MPC Meeting 2024 - https://lnkd.in/d9PsnrBr Live RBI News : Highlights of the RBI MPC Meeting 2024 Shaktikanta Das, the governor of the Reserve Bank of India (RBI), declared the first monetary policy for the 2024–25 fiscal year on Friday. The Monetary Policy Committee (MPC) of the RBI, which sets interest rates, held a two-day review meeting that ended Thursday, April 5. For the sixth time in a row, the RBI chose to maintain the 6.5% key policy repo rate. The governor Das-led six-member MPC also agreed to keep the policy at "withdrawal of accommodation." For FY25, the RBI has estimated that India's real GDP growth rate will be 7%. The anticipated CPI inflation rate for FY25 is 4.5%. Follow along for live updates from the RBI MPC Meeting 2024 here Highlights of the RBI MPC Meeting 2024: The major features of RBI policy are as follows Highlights of the RBI MPC Meeting 2024: The first monetary policy of FY25 was announced by RBI Governor Shaktikanta Das. The main points of the RBI's April policy are as follows: Policy Actions: Live RBI News The repo rate remained at 6.5% The "withdrawal of accommodation" policy stance kept the GDP growth estimate for FY25 at 7%. The forecasts are as follows: 7.1% for Q1, 6.9% for Q2, 7% for Q3, and 7% for Q4. 4.5% CPI inflation is projected for FY25. The following is a thorough inflation forecast: 4.9% in Q1, 3.8% in Q2, 4.6% in Q3, and 4.5% in Q4. Non-political actions: To be disclosed is the plan for trading sovereign green bonds at the IFSC. launch of a mobile application to use RBI's Retail Direct Scheme for GSec market participation A draft circular for banks' LCR framework will soon be released. handling products derived from the rupee interest rate for all small finance institutions Activating UPI for the Cash Deposit Service Prepaid Payment Instruments (PPIs) can access UPI via third-party applications. CBDC distribution via non-bank payment system providers What are the new guidelines of RBI? The decision on which network to use for a customer's card is made by the card issuer, whether a bank or a non-bank institution. RBI guidelines change: The Reserve Bank of India (RBI) said on March 6, 2024, that card issuers should not enter into any agreement with card networks. What is the RBI Monetary Policy Committee? The Governor of the Reserve Bank of India (RBI) chairs the Monetary Policy Committee (MPC). The objective of the Monetary Policy Committee (MPC) was to set the benchmark policy interest rate (repo rate) to keep inflation under control. monetary policy instruments : Live RBI News Reverse Repo Rate: The interest rate at which the Reserve Bank absorbs liquidity overnight from banks against the collateral of eligible government securities under the LAF. Accommodation Facility (LAF) : Live RBI News LAF includes overnight accommod

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"

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.

RBI has left repo rate unchanged at 6.5%. Justifying it, RBI said that inflation is well within control at about 4%. Though I believe they could have reduced by 0.5% to stimulate demand, neverthless, let's try o find out the instruments that Central Banks have to manage cash flow in the economy. 1. Interest Rates a. Policy Interest Rate The most direct tool for controlling inflation is the manipulation of the policy interest rate, often referred to as the base rate or discount rate. By raising interest rates, central banks make borrowing more expensive and saving more attractive. This reduces consumer spending and business investment, which in turn lowers demand for goods and services, helping to cool inflation. b. Open Market Operations (OMOs) Central banks conduct open market operations by buying or selling government securities in the open market. To combat inflation, they sell government bonds to reduce the money supply. When commercial banks buy these bonds, they have less money to lend, which increases interest rates and curbs spending. 2. Reserve Requirements Reserve requirements refer to the amount of funds that a bank must hold in reserve against deposits made by customers. By increasing reserve requirements, central banks reduce the amount of money banks can lend out. This decreases the money supply in the economy, leading to higher interest rates and lower spending, thus helping to control inflation. 3. Discount Rate The discount rate is the interest rate charged by central banks on short-term loans to commercial banks. By raising the discount rate, central banks make it more expensive for banks to borrow funds, which decreases the money supply and raises interest rates in the broader economy. This helps to reduce inflationary pressures by discouraging borrowing and spending. 4. Quantitative Tightening (QT) Quantitative tightening involves reducing the central bank's balance sheet by selling off assets, such as government bonds and mortgage-backed securities, or by not reinvesting the proceeds of maturing securities. This action reduces the amount of money circulating in the economy, increasing interest rates and controlling inflation. 5. Credit Controls Credit controls include a range of measures to regulate the amount of credit available in the economy. Central banks can impose direct credit controls, such as limits on the amount of credit banks can extend to certain sectors, or they can influence the terms and conditions under which credit is extended. By tightening credit conditions, central banks can reduce consumer and business spending, helping to control inflation. 6. Moral Suasion Moral suasion involves the central bank persuading commercial banks and other financial institutions to align their policies with the broader goals of the central bank. For example, during periods of high inflation, central banks may urge banks to tighten their lending standards to reduce the money supply. Follow for more such content.