RBI MPC Meeting October 2024

The Reserve Bank of India's (RBI) 51st Monetary Policy Committee (MPC) meeting, which met from October 7-9, was chaired by the RBI Governor Shaktikanta Das provided key insights into the country’s economic trajectory for the fiscal year ahead. “It was the first meeting of the reconstituted MPC.”

• MISSION-MPC is responsible for making important decisions about the monetary policy of India, particularly in setting key interest rates. These rates influence lending rates in the economy and impact inflation, borrowing costs, and overall economic growth.
• The MPC meet took place amidst the US Federal Reserve's recent decision to aggressively lower its policy rates by 50 basis points. Additionally, central banks in several other advanced economies are expected to take similar actions.

RBI MPC Meeting October 2024 Key Highlights & Outcomes:

Unchanged Repo Rate:

Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 6.5% for the 10th consecutive time.

• 2 years ago, in response to global central banks raising interest rates to combat high inflation, RBI embarked on a series of repo rate hikes.
• Between May 2022 and February 2023, the Monetary Policy Committee (MPC) increased the repo rate (key policy rate) by 250 basis points, bringing it to 6.5%.

Change in Monetary Policy Stance:

The MPC changed the policy stance to ‘Neutral’ from ‘withdrawal of accommodation’.

• “Neutral” stance allows the MPC greater flexibility to adjust monetary policy as needed while “withdrawal of accommodation” means restrictive monetary policy stance where the RBI aims to reduce the money supply in the economy (curb inflationary pressures).
• When the RBI withdraws accommodation, it signals that it is less inclined to support economic growth through lower rates, focusing instead on stabilising prices.

Inflation Targets:

The RBI has retained its Consumer Price Index (CPI) inflation forecast for FY2025 at 4.5%.

Real GDP Growth Projections:

The RBI kept its real GDP growth projection for FY25 at 7.2%. India’s growth story remains strong, driven by private consumption and investment demand.

Hike in UPI 123 PAY Transaction Limit:

• The RBI has increased the transaction limit for UPI 123PAY, raising it from ?5,000 to ?10,000.
• Additionally, the UPI Lite transaction limit has been doubled, going from ?500 to ?1,000, while the limit for UPI Lite wallets has been raised from ?2,000 to ?5,000.

“UPI 123PAY is specifically designed for users of non-smartphones or feature phones, enabling them to make payments using UPI without the need for an internet connection.”

Reserve Bank-Climate Risk Information System (RB-CRIS):

• RBI has proposed to create a data repository namely RB-CRIS to bridge the gap in climate-related data that is currently available in a fragmented manner.
• It will undertake climate risk assessments for ensuring stability of balance sheets of financial entities and that of the financial system.

Next Steps

• The minutes of this MPC meeting will be released on October 23, 2024.
• The next MPC meeting is scheduled for December 4 to 6, 2024.

Conclusion

The October 2024 RBI Monetary Policy Committee (MPC) meeting underscored a cautious yet stable approach towards India’s monetary policy, with a focus on maintaining the status quo. By keeping the repo rate unchanged at 6.5% for the tenth time, the RBI is signalling confidence in the current trajectory of inflation and growth. The shift to a "neutral" monetary stance reflects a flexible approach, allowing the MPC to respond to evolving economic conditions while balancing inflation and growth concerns.The meeting's outcomes highlight a forward-looking strategy aimed at supporting India’s long-term economic growth while ensuring financial stability.