The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Thursday said the repo rate will be unchanged at 6.5 per cent. This is for the third time that the central bank has kept the basic rate unchanged. Governor Shaktikanta Das said the MPC voted unanimously to leave the repo rate unchanged. The repo rate was last hiked in February 2023 by 25 basis points (bps).
At the MPC meeting in April, the RBI paused its rate hike cycle and stayed with the 6.5 per cent repo rate, and kept it as is in June. Prior to that, the central bank had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation.
Governor Das said that earlier rate hikes worked through the economy. He added that this time the MPC unanimously voted to leave the repo rate unchanged at 6.5 per cent. MPC decided by a majority of 5:1 to focus on the withdrawal of accommodation, he said.
Besides, Das said that Marginal Standing Facility (MSF) Rate and Bank Rate will be at at 6.75 per cent. The SDF rate has been kept unchanged at 6.25 per cent.
“The cumulative rate hike of 250 basis points, undertaken by the MPC so far, is working its way into the economy. Nevertheless, domestic economic activity is holding up well, and is likely to retain its momentum, despite, weak external demand. Considering this confluence of factors, the MPC decided to remain watchful and evaluate the emerging situation,” Das said.
The RBI governor added the MPC remains resolute in its commitment to align inflation to 4 per cent target.
“Consequently, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent, with preparedness to act, should the situation so warrant. The MPC remains resolute in its commitment to align inflation to the 4 per cent target, and anchoring of inflation expectations,” the RBI governor said.
Repo rates since 2022
10-08-2023 6.50% 08-06-2023 6.50% 06-04-2023 6.50% 08-02-2023 6.50% 07-12-2022 6.25% 30-09-2022 5.90% 05-08-2022 5.40% 08-06-2022 4.90% 04-05-2022 4.40% 08-04-2022 4.00% 10-02-2022 4.00%
Governor Das said: "Happy to see the Indian economy is continuing to grow at a reasonable pace.India’s strong fundamentals have laid the foundations of sustainable growth.India can become the new growth engine for the world."
"India’s strong macroeconomic fundamentals have led to strong growth. Our economy has continued to grow at a reasonable pace becoming the fifth largest economy in the world, contributing around 15 per cent to global growth," Das said.
He added that starting fortnight August 12, banks will have to maintain an incremental CRR of 10 per cent on the increase in their Net Demand and Time Liabilities (NDTL) between May 19 and July 28. The Cash Reserve Ratio (CRR) is a monetary policy tool used by central banks to regulate the money supply and control inflation.
The CRR has been kept unchanged at 4.5 per cent.
The incremental CRR of 10% for banks is intended to absorb the surplus liquidity that has been generated and is purely a temporary measure to manage the liquidity overhang. There will remain adequate liquidity in the banking system despite the move, Das said.