RBI MPC keeps repo rate unchanged at 6.5%

New Delhi, October 2023.

RBI Monetary Policy Committee has kept the key policy repo rate unchanged at 6.5%. This is the fourth meeting on the trot that the MPC decided to maintain the status quo on the repo rate.

The MPC last raised this rate by 25 bps to 6.50% at its meeting in February 2023. Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the transmission of 250 bps repo rate cut is still incomplete. The Real GDP growth projection for FY24 remains unchanged at 6.5%. Similarly, inflation for FY24 is projected at 5.4%, unchanged from earlier.

Preventing food and fuel price shocks are non-negotiable necessities, the Governor said. RBI may have to consider open market operations (OMOs) with regard to G-secs to manage liquidity, Das added. In the post Monetary Policy press conference, Das said that OMO will be via auction.

 Virat Diwanji, Group President and Head – Consumer Bank, Kotak Mahindra Bank”

“Though the decision to hold the policy rates was in line with the broader expectations, the commentary by the Governor has left several clues into the emerging scenarios, including the increasing inflationary pressures in the system, both internal and external, and the increasing inclination to suck out additional liquidity. However, the GDP growth forecast for FY24 at 6.5% is comforting, backed by robust domestic economic activity and strong consumption. A nascent revival in rural growth is most welcome as it will add to the resilience of the overall economy. As RBI continues to monitor price and financial stability, it may also have to keep a watch on Bond yields, equity markets, and the US dollar too.”

As expected, it was a “ status quo” policy with a renewed emphasis on the inflation target of 4% and resilient macro-economic indicators. Both the economic growth and inflation estimates for the year have been maintained with a commitment to ensure adequate liquidity for supporting growth. The stance remains “withdrawal of accommodation”. Economic trends hint at strong underlying growth trends and healthy credit growth. Even as urban consumption remains robust, the rural markets are showing a promising revival. Overall, a hawkish policy and RBI remains watchful of emerging global volatilities for any policy action to ensure continued price and financial stability. 

Shanti Ekambaram, Whole-Time Director, Kotak Mahindra Bank Ltd