RBI governor Shaktikanta Das has announced the monetary policy statement keeping the repo rate unchanged at 6.5%. Repo rate is the rate at which commercial banks can borrow funds from RBI by depositing their securities to the bank. It is 9th consecutive time the bank has decided to keep the repo rate constant.
The RBI governor has projected the real GDP growth rate at 7.2% for FY24-25. RBI has also adjusted its CPI inflation forecast to 4.4% for FY25. He also said that improved agriculture activities will further boost the rural consumption, given normal monsoon would take place. RBI has also raised tax payment limit form through UPI from 1lakh to 5 lakh. RBI has also laid down proposals to speed up clearance of checques to few hours.
IMPACT OF REPO RATE
Banks will be able to borrow money from the RBI at the same interest rate as before, so their borrowing costs will remain unchanged. Since the repo rate is unchanged, banks won’t need to increase their interest rates, allowing individuals and businesses to continue borrowing at current rates. This is a significant relief for borrowers with floating-rate home loans, as their interest rates are directly linked to the repo rate.
| RBI GDP ESTIMATES | ||
| QUARTERS | GDP CURRENT ESTIMATES | GDP PREVIOUS ESTIMATES |
| FY25 | 7.20% | 7.20% |
| Q1 FY25 | 7.10% | 7.20% |
| Q2 FY25 | 7.20% | 7.20% |
| Q3 FY 25 | 7.30% | 7.30% |
| Q4 FY25 | 7.20% | 7.20% |
| RBI CPI ESTIMATES | ||
| QUARTERS | CPI CURRENT ESTIMATES | CPI PREVIOUS ESTIMATES |
| FY25 | 4.50% | 4.50% |
| Q2 FY25 | 4.40% | 3.80% |
| Q3 FY25 | 4.70% | 4.60% |
| Q4 FY 25 | 4.30% | 4.50% |
| Q1 FY26 | 4.40% | – |
OUTLOOK-OUR VIEW
The RBI governor’s announcement was in line with market expectations. It seems likely that the RBI may lower rates in future meetings. We expect them to wait for the Fed’s next announcement before making any decisions. Although rates haven’t been reduced this time due to fluctuations in the food index, there is a strong probability of a rate cut in the near future.