RBI MPC Updates: Shaktikanta Das headlines inflation, says no room for knee-jerk reactions

RBI Monetary Policy Meeting Dec 2024 Updates: Catch all the updates here

The Reserve Bank of India left its benchmark interest rate unchanged in the last policy meeting of the year, citing continued inflationary pressures even though economic growth slumped. The Reserve Bank of India’s monetary policy committee voted four-to-two to keep the repurchase rate at 6.5 per cent on Friday.

 

“MPC believes only with durable price stability can strong foundations be secured for high growth,” Governor Shaktikanta Das said in a live streamed address in Mumbai. India’s inflation has remained well above the RBI’s 4 per cent target aim, with price gains accelerating to a 14-month high of 6.21 per cent in October. Das had previously said a rate cut at this stage would be “very risky” and he was in no hurry to join the wave of easing by global policymakers. 

 

The Monetary Policy Committee (MPC) consists of three RBI and three external members.

 

“High inflation reduces the disposable income in the hands of consumers and dents private consumption which negatively impacts the real GDP growth.  The increasing incidence of adverse weather events, heightened geopolitical uncertainties and financial market volatility pose upside risks to inflation,” said Governor Das in his statement.

 

The MPC believes that only with durable price stability can strong foundations be secured for high growth, Das said, adding that the MPC remains committed to restoring the inflation growth balance in the overall interest of the economy.

“Accordingly, the MPC decided to keep the policy report unchanged at 6.5 per cent in this meeting and also to continue with the neutral stance of monetary policy as it provides flexibility to monitor and assess the outlook on inflation and growth appropriately,” he added.

 

Meanwhile, the RBI revised the growth forecast for the current financial year lower to 6.6 per cent, from the previous estimate of 7.2 per cent. The central bank also revised the inflation forecast upward to 4.8 per cent, against the earlier estimate of 4.5 per cent.

 

4:03 PM

RBI asks banks to collaborate with MuleHunter.AI to find mule accounts

The RBI on Friday asked banks to collaborate with its initiative MuleHunter.AI to weed out mule accounts which are used to commit financial fraud. A mule account is a bank account used by criminals to launder illicit funds, often set up by unsuspecting individuals lured by promises of easy money or coerced into participation. The transfer of funds through these highly interconnected accounts makes it difficult to trace and recover the funds.

3:34 PM

RBI MPC Live Updates: Effort is to de-risk our trade, no step towards de-dollarisation: Guv Das

RBI MPC Live Updates: There has been no discussion on BRICS currency. India has not taken any step towards de-dollarisation. Our effort is to de-risk our trade, says RBI Governor Shaktikanta Das.

3:30 PM

Realtors expect housing demand to remain strong on stable mortgage rate, hope for rate cut in new year

Realtors industry bodies CREDAI and NAREDCO expect the RBI to reduce key interest rate in its next monetary policy to boost housing demand, which they said will remain strong with the stability of interest rates on home loans.

3:12 PM

RBI MPC Live Updates: ‘'Repo rate cut likely in February'

The Reserve Bank of India has signalled that it is unlikely to lower the repo rate until there is firm assurance that inflation is easing towards the target. With the economy at a pivotal stage for both growth and inflation, February emerges as a potential timeline for a rate cut. A key element to monitor will be the policies introduced under the Trump administration and their potential effects on inflation and currency dynamics.

3:06 PM

RBI to allow small finance banks to extend credit lines through UPI

The Reserve Bank on Friday proposed to allow small finance banks to extend pre-sanctioned credit lines through Unified Payments Interface (UPI). UPI is an instant real-time payment system developed by NPCI for transactions through mobile phones. In September 2023, the scope of UPI was expanded by enabling pre-sanctioned credit lines to be linked through UPI and used as a funding account by commercial banks excluding Payments Banks, Small Finance Banks (SFBs) and Regional Rural Banks.

3:02 PM

RBI MPC Meeting LIVE: ‘Indian markets likely to stay cautious amid FII outflows

RBI MPC Live Updates: The Reserve Bank of India's move to boost liquidity by reducing the CRR, adding more than Rs 1 trillion to the banking system, has been positively received. However, without a corresponding interest rate cut, this step may not have a significant impact on market sentiment. Considering the prevailing conditions, the Indian markets are expected to remain subdued as foreign institutional investors (FIIs) persist with their selling activities.

2:57 PM

How did the RBI get growth projections for Q2 wrong?

After the light-hearted exchange, the reporter moved on to a key economic question, asking why the RBI’s growth estimate for the second quarter had dropped to 5.4 per cent from 7 per cent.

 

MPC member Michael Debabrata Patra explained that the growth challenges stemmed from issues on both the demand and supply sides:  

Demand side: The main problem is weak investment, driven by a slump in sales growth.

Supply side: Manufacturing remains the critical issue, with inflation dampening urban consumer spending, leading to reduced sales and investments.

2:51 PM

RBI's CRR cut brings relief: Time for borrowers to review home loan terms

The Reserve Bank of India (RBI) on Friday reduced the cash reserve ratio (CRR) by 50 basis points (bps) to 4% from 4.5 per cent, freeing up funds in the banking system. CRR is the percentage of a bank’s deposits that must be kept with the RBI as liquid reserves. The central bank’s Monetary Policy Committee, however, left the repo rate unchanged at 6.5 per cent in a majority 4-2 decision. This marks the eleventh consecutive policy meeting over the past 22 months without a change in the repo rate, which serves as a benchmark for lending rates.

Read full report here

2:49 PM

Diamond sector facing challenges during last 3 yrs due to reduced demand

The country's diamond sector has been facing challenges during the last three years due to reduced demand in major export destinations and supply side issues such as G7 sanctions on Russia, Parliament was informed on Friday.

2:48 PM

RBI MPC Update: Sensex, Nifty 50 remain flat with a negative trend post policy announcement

The Indian equity market showed little movement and leaned slightly negative following the Reserve Bank of India's (RBI) policy announcement. By 2:30 pm, the Sensex declined by 53.39 points (0.07%) to stand at 81,712.47. Similarly, the Nifty 50 dropped 18.30 points (0.07%) to 24,690.10. The Bank Nifty index also reflected subdued trading, slipping by 17.30 points (0.03%) to reach 53,586.25.

2:43 PM

RBI MPC Meeting LIVE: 'For homebuyers, steady rates offer clarity and encourage more people'

Sandeep Ahuja, CEO, Atmosphere Living, said, "The RBI's decision to maintain the repo rate is a significant boost for the real estate sector, ensuring stability in home loan interest rates and fostering confidence among both buyers and developers. For homebuyers, steady rates offer clarity and encourage more people, including those on the fence, to take the plunge into homeownership."

2:31 PM

RBI raises FY25 inflation estimate to 4.8%, CPI to remain elevated in Q3

The Reserve Bank on Friday raised the inflation projection for current fiscal year to 4.8 per cent from 4.5 per cent with Governor Shaktikanta Das saying lingering food price pressures are likely to keep headline inflation elevated in the December quarter.

 

Consumer price index (CPI)-based inflation increased sharply in September and October 2024 led by an unanticipated increase in food prices. Core inflation, though at subdued levels, also registered a pick-up in October. Fuel group remained in deflation for the 14th consecutive month in October.

Read full report here

2:16 PM

CRR cut to increase liquidity, help exporters get credit at easy terms: FIEO

The RBI's decision to cut Cash Reserve Ratio (CRR) will increase liquidity in the system, thereby helping exporters get credit at easy terms, FIEO said on Friday. Cash Reserve Ratio is the proportion of deposits that banks must keep with the central bank. The RBI has slashed CRR by 50 basis points to 4 per cent, effective in two tranches on December 14 and December 28.

2:15 PM

Where did FIIs park money in Nov? IT, realty, BFSI see highest inflows

November 2024 saw Foreign Institutional Investors (FIIs) adjustting their portfolios amidst evolving market conditions. While Information Technology (IT), Banking, Financial Services, and Insurance (BFSI), and Real Estate (Realty) saw the largest inflows, Oil & Gas, Automobiles (Autos), Telecommunications (Telecom), and Fast-Moving Consumer Goods (FMCG) sectors experienced the most significant outflows, shows data analysed by JM Financial. 

Read full report here

2:13 PM

RBI Monetary Policy Live: Shaktikanta Das warns of rising inflation risks

Shaktikanta Das pointed out that the increasing occurrence of weather-related events, financial market volatility, and geopolitical tensions present considerable risks of driving inflation higher.