RBI Keeps Repo Rate at 6.5%.

The Reserve Bank of India (RBI) Governor, Shaktikanta Das, announced that the repo rate will remain unchanged at 6.5% for the tenth consecutive time at the Monetary Policy Statement on October 09, 2024, at 10 Am. He disclosed this decision which was made with a 5:1 majority vote by the Monetary Policy Committee (MPC). He said that the decision allows the central bank to adjust interest rates as needed to manage inflation.

The RBI also kept other key rates unchanged as the Standing Deposit Facility (SDF) rate remains at 6.25%, the Marginal Standing Facility (MSF) rate at 6.75%, the bank rate at 6.75%, and the reverse repo rate at 3.35%. Additionally, the MPC shifted its stance from “withdrawal of accommodation” to “neutral,” giving the central bank flexibility to respond to changing economic conditions.

Monetary Policy Statement by Shri Shaktikanta Das, RBI Governor – October 09, 2024, at 10 am https://t.co/qH6y2PRPrS

— ReserveBankOfIndia (@RBI) October 9, 2024

Alongside this decision, Das cautioned Non-Banking Financial Companies (NBFCs) about their aggressive growth strategies without proper administration from the Reserve Bank of India. “Overall NBFC sector remains healthy but I have a few messages,” he said. Shaktikanta Das also warned NBFCs to prioritise risk management and ensure they’re lending responsibly. He stated that while the overall NBFC sector is healthy some companies are taking on too much risk without adequate safeguards. He stressed that banks and NBFCs must carefully evaluate their exposure to unsecured segments to prevent potential instability in the financial system.

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When it comes to the RBI forecasts inflation rates, it will be 4.8% in the third quarter of FY25, 4.2% in the fourth quarter, and 4.5% for the entire fiscal year assuming a normal monsoon. For the first quarter of FY26, inflation is expected to be 4.3% and retail inflation may see a temporary rise in September due to increased food prices and unfavorable base effects, Shaktikanta Das reminded.

He also said that the RBI estimates India’s economic growth to be 7.2% for FY25 and quarterly growth estimates are 7% for Q2 FY25, 7.4% for Q3 FY25 and Q4 FY25, and 7.3% for Q1 FY26. He added that these estimates indicate steady economic growth and the RBI’s decision to maintain the repo rate aims to support this growth while keeping inflation in check. The RBI has been mandated to maintain inflation within the target range of 4%. The MPC meeting was held from October 7-9, 2024 marking the first meeting with three new external members appointed by the government.

Also, read| India’s Growth Story Remains Unharmed, Says RBI Governor