RBI Monetary Policy Live | Status Quo On Repo Rate A Pause, Not Pivot: Das

India's Monetary Policy Committee has decided to keep the benchmark repo rate unchanged but is ready to act as and when needed, amid sticky inflation at home and banking crisis elsewhere.

Key takeaways from RBI Governor Shaktikanta Das' speech:

• Decision to keep repo rate unchanged at 6.5% was unanimous.

• The standing deposit facility rate, pegged 25 bps below the repo rate, is at 6.25%.

• The marginal standing facility rate, which is 25 bps above the repo rate, is at 6.75%.

The committee had first raised rates by 40 basis points at an unscheduled meeting in May last year, followed by 50 basis points each in June, August and September. It raised rates by a further 35 basis points in December last year, followed by a hike of 25 basis points in February this year.

The MPC decided with 5:1 majority to remain focused on withdrawal of accommodation, Das said.

Track live updates and key highlights of India's first monetary policy of fiscal 2024 , here:

The Reserve Bank of India has proposed to link pre-sanctioned bank credit lines with the Unified Payments Interface to further expand the scope of real-time payments network.

"It is now proposed to expand the scope of UPI by permitting operation of pre-sanctioned credit lines at banks through the UPI. This initiative will further encourage innovation," RBI Governor Shaktikanta Das said after the monetary policy committee meeting on Thursday. The move follows the June 2022 decision to link Rupay credit cards with UPI. (read more)

India announced steps to deepen its foreign exchange market by allowing local residents trade currency derivatives contracts popular in the offshore market, according to the central bank.

Local lenders with a so-called IFSC Banking Unit — basically having a unit in the International Financial Services Centre currently in GIFT City in the western state of Gujarat — will be permitted to offer non-deliverable forwards to residents onshore, RBI Governor Shaktikanta Das said in his policy speech Thursday. That will enable banks to offer enhanced currency hedging opportunities to their customers. (read more)

There have been some improvements in high-frequency indicators around the world, according to Reserve Bank of India Governor Shaktikanta Das. However, the global economic outlook is now marred by concerns about financial stability, he said.

These uncertainties, combined with high inflation prints, have led to financial market volatility, reflected in sizeable two-way movements in bond yields, a fall in equity markets, and the U.S. dollar losing steam.

"Amidst this volatility, the banking and non-banking financial service sectors in India remain healthy, and financial markets have evolved in an orderly manner," the RBI Governor said in his speech on Thursday after announcing the first monetary policy decision of fiscal 2024. (read more)

"We are seeing that interest," RBI Deputy Governor T. Rabi Sankar says, when asked about the interest in rupee internationalistion.

"Volumes are not picking up as much, but those are teething issues that needed to be worked out," he says.

RBI is seeing increased interest from a number of countries, Sankar says.

"Initial processes are on and are encouraging. This is a long-term objective and we have to build towards that."

The Reserve Bank of India has always been prudent and conservative on its growth projections, Governor Shaktikanta Das says when asked whether the central bank is over-optimistic in its GDP estimates for FY24.

The central bank has raised its GDP growth expectations for FY24 to 6.5% from 6.4% earlier.

The assumption of $85 for crude oil is the average for FY24, Das says.

"We have reasons to believe that crude oil prices will be around the level we have estimated," the RBI governor says.

Inuncertain times like these, Reserve Bank of India will not like to commit to one course of action, Governor Shaktikanta Das says.

"We have taken the policy decision given the confluence of factors which prevail as of today," the governor says. "Inflation target of the RBI is 4%. We have to keep the target in mind and move toward it."

In the fight against inflation, interest rates alone have not been used, RBI Deputy Governor Michael Patra says. Interest rates have been used in conjunction with supply-side measures, he says.

Today's monetary policy decision of a status quo on repo rate is a pause, not a pivot, RBI Governor Shaktikanta Das says at a press conference after his speech earlier today.

There has been an effective increase of 290 basis points over one year, including 40 bps of SDF rate increase. This hike has translated to monetary policy transmission by way of increase in overnight call rates by 320 bps.

It is now necessary to assess cumulative action taken so far, Das says.

"The MPC is watchful, won’t hesitate to take action in future meetings," Das says. "Given that there is macroeconomic stability, priority continues to be price stability."

The RBI governor has announced a grievance redressal mechanism for credit reporting institutes, which includes:

• Compensation mechanism for delayed updates to consumer reports.

• Provision for SMS/email alerts for credit information checks.

• Time frame of inclusions of data received by credit information firms.

• Disclosure of customer complaints received by credit information firms.

The RBI governor has introduced measures to deepen the forex market, improve payments system, and make processes easier for depositors

Banks with international banking units can offer non-deliverable forex derivative contracts involving Indian rupee to resident users in the onshore markets. This will deepen forex markets in India.

Processes for entities to seek licences and other requirements from the regulator to be conducted through centralised web-based portal.

The Reserve Bank of India will develop a web portal to search across banks for possible unclaimed deposits.

The RBI proposes to expand scope of UPI by permitting operation of pre-sanctioned credit lines of banks through UPI.

India's current account deficit for the first three quarter of FY23 stood at 2.7% of GDP, RBI Governor Shaktikanta Das says.

• In the third quarter, CAD narrowed on account of lower merchandise trade deficit and robust growth in services export.

• Merchandise trade deficit further narrowed in January and February 2023 on the back of sustained decline in imports.

• India's services exports continue to grow in the first quarter of 2023.

India's current account deficit is expected to remain moderate in the fourth quarter of FY23 and also in FY24 at a level, which is viable and eminently manageable.

The Reserve Bank of India will continue to adopt a nuanced and agile approach to liquidity management, Governor Shaktikanta Das says.

The central bank will remain flexible in meeting productive requirements of economy, as well as use two-way operations as may be necessary.

The RBI will complete government’s borrowing programme in a non-disruptive manner, Das says.

The rupee has moved in an orderly manner in 2022 and continues to remain so in 2023, RBI Governor Shaktikanta Das says. "We remain watchful and focussed on maintaining the stability of Indian rupee."

India's forex reserves now stand at over $600 billion, up from $524.5 billion in October 2022, Das says.

The monetary policy committee remains watchful of the evolving outlook, impact of our actions over last year, RBI Governor Shaktikanta Das says.

“While we have kept policy rate unchanged, this decision was taken based on our assessment of the macroeconomic and financial conditions with reference to information available upto today.”

"Our job is not yet finished and war against inflation has to continue until durable decline in inflation closer to target is seen."

The sudden announcement of output cut by OPEC+ and resulting oil price volatility is yet another example of global volatility, Das says.

India's monetary policy panel has aimed for non-disruptive normalisation from pandemic era measures.

• Financial conditions evolved in line with productive needs.

• Projections for FY24 point to softening in inflation.

• Disinflation is expected to be gradual and protracted.

The Reserve Bank of India projects real GDP growth at 6.5% in FY24 with risks evenly balanced. India's GDP growth is seen at 7.8% in Q1 FY24, 6.2% in Q2 FY24, 6.1% in Q3 FY24, and 5.9% in Q4 FY24.

The retail inflation is seen at 5.2% in FY24, with CPI at 5.1% in Q1 FY24, 5.4% in Q2 FY24, 5.4% in Q3 FY24, 5.2% in Q4 FY24.

• PMI services remained in expansion zone at 57.8 driven by favourable demand conditions.

• Aggregate demand conditions were resilient, even as private consumption showed signs of slowdown.

• Rural demand indicators registered healthy growth.

• Passenger car sales, credit card spends showed robust increase.

• Investment activity reflected buoyancy on back of government’s thrust on infra spending, revival of corporate investment in key sectors.

India's retail inflation, as measured by the consumer price index, has risen since December, driven by price pressures on cereals, milk and fruits.

Core inflation remains elevated, but headline inflation is projected to moderate in 2023-24, RBI Governor Shaktikanta Das says. Monetary policy actions taken since May 2022 are still having an effect on the system, he says.

The recent high frequency indicators suggest improvement in global economic activity, RBI Governor Shaktikanta Das says.

• Headline inflation remains well above central bank targets.

• The banking and NBFC sectors in India remain healthy.

India's economic activity remains resilient, with real GDP growth expected at 7% in FY23, Das says.

The Reserve Bank of India's monetary policy committee has voted unanimously to keep the repo rate unchanged at 6.5%.

Still, the MPC is ready to act if necessary, RBI Governor Shaktikanta Das said, even as the rate-setting committee remained focused on withdrawal of accommodation.

The MPC has decided with 5:1 majority to remain focussed on withdrawal of accomodation.

Liquidity in the system has turned deficit with the net liquidity adjustment facility injection at Rs 45,000 crore as of March 22, 2023, compared to a surplus of Rs 6.35 lakh crore at the beginning of the fiscal year, according to SBI Research.

India's retail inflation, as measured by the consumer price index, stood at 6.44% in February in comparison to 6.52% in January, remaining above the RBI's target range for the second straight month. Core inflation, excluding food and fuel, stood at 6.23%, against 6.28% a month ago.

The Indian rupee has opened stronger against the US dollar ahead of the monetary policy statement by RBI Governor Shaktikanta Das on Thursday.

The local currency appreciated by 5 paise to open at 81.95 against the American greenback. It had closed at 82 on Wednesday.