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RBI keeps repo rate at 6.5% for 11th time in a row
The repo rate last saw a change in February 2023, when it was raised to the current 6.5%.
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 6.5%, RBI Governor Shatikanta Das announced on Friday.
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The decision was taken by a 4:2 majority, Das added.
The MPC also decided to hold the Standing Deposit Facility (SDF) rate at 6.25% while the Marginal Standing Facility (MSF) and Bank Rate was retained at 6.75%.
Further, Das notified that the central bank's projection of India's Gross Domestic Product (GDP) growth for the ongoing financial year now stood at 6.6%, down from the earlier estimate of 7.2%.
This came on the back of less-than-expected GDP growth of 5.4% in the three months ended September, the slowest in seven quarters.
Das said, “Growth in real GDP in the second quarter of this year at 5.4% turned out to be much lower than anticipated. This decline was led by a substantial deceleration in industrial growth from 7.4% in the first quarter to 2.1% in the second quarter due to the subdued performance of manufacturing companies, contraction in mining activity and lower electricity demand.”
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“Going forward, high-frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in the second quarter of this year and it has since recovered aided by strong festive demand and pickup in rural activities,” he stated.
Meanwhile, the central bank raised its retail inflation forecast to 4.8% for FY'25, from the earlier 4.5%. Additionally, it cut the Cash Reserve Ratio (CRR) to 4%, a reduction of 50 bps (basis points).
This was the last meeting of the year for the MPC, and followed the one in October. The next one is scheduled for February and, according to an HDFC Bank report, the repo rate could be raised at that meeting.
