RBI MPC Meet Highlights: Policy rates kept unchanged, inflation target at 4%; Governor says liquidity to be actively managed

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RBI MPC meet live updates: OMO policy tool for the future in its efforts to suck out liquidity

Indranil Pan, Chief Economist, YES BANK also adds that for now, it seems to be eluding as the RBI themselves have forecasted inflation for the year at 5.4%, with even the Q1 of the next financial year being higher at 5.2%. "Given that excess liquidity could be inflationary and can pose risks to financial stability, the RBI has started deploying policy tools from the August policy to remove the excess liquidity from the system. Unexpected by all, the RBI announces that OMO sales also becomes a policy tool for the future in its efforts to suck out liquidity. This is important even from a longer perspective, given that India could be expecting large FX flows in FY25 on the back of JPM bond index inclusion,” Pan adds.

RBI MPC meet live updates: RBI rightly desisted from providing any dovish bent to the policy communication

Indranil Pan, Chief Economist, YES BANK says, “This policy was on expected lines with no change in the policy rate as also the stance. Even as food inflation and core inflation had been moderating, the RBI rightly desisted from providing any dovish bent to the policy communication. On the other hand, the future guidance was laced with adequate cautionary notes on the inflation trajectory and the risks to the same coming from uncertainties over the kharif output, lower reservoir levels and volatile global crude and commodity prices. And there is a clear reverberation of the previous policy – that the RBI will only be happy if they are able to hit the 4% mark on inflation on a durable basis."

RBI MPC meet live updates: View RBI's stance as a ‘hawkish hold’ on policy rates

Achala Jethmalani, Economist at RBL Bank views RBI's stance as a ‘hawkish hold’ on policy rates as the focus remains on bringing inflation down to the 4.0% target. "The RBI’s comments on existing banking system liquidity is indicative of tighter system liquidity conditions continuing as it stands ready to deploy all its tools to absorb excess system liquidity. Brace for a long pause on the Repo Rate with tighter liquidity conditions. This is expected to complete the policy transmission in this hiking cycle with the objective of keeping borrowing costs high. The resilience in economic growth despite the restrictive financial conditions underpin the RBI’s move to tighten the liquidity conditions," says Jethmalani.

RBI MPC meet live updates: Policy prerogative would ensure financial stability

Radhika Rao, Senior Economist of DBS Bank says, "Despite a pause, the RBI MPC’s hawkish language suggests that price stability is questionable, and domestic financial conditions will remain tight. Policymakers are also mindful of the tight external financial conditions and narrowing (India-US) rate differentials, notwithstanding the comfortable reserves cushion and impending foreign bond inflows. Post-decision, Indian government bonds were under a cloud, as OMOs could be tapped for liquidity management."

RBI MPC meet live updates: Inflation risks remain on the upside, says Kotak Institutional Equities

“The RBI’s decision to pause along with retaining the withdrawal of accommodation stance was in line with expectations. Importantly, the RBI has explicitly highlighted the need to use OMO sales to modulate liquidity. This will weigh down bond markets’ sentiments. Concerns on food inflation were highlighted which can impart upside to headline inflation. We believe that inflation risks remain on the upside given weather related impact as well as commodity prices. Global monetary conditions will also weigh on RBI’s policy decisions. The good part is that growth remains resilient and core inflation remains under check. We maintain our call for a prolonged pause on repo rate at 6.5% well into FY2025 while liquidity over the medium term will be aimed at being close to neutral," says Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.

RBI MPC meet live updates: 10-year benchmark government bond yield rises 8 bps on OMO sales announcement

After the Reserve Bank of India (RBI) indicated they may consider Open Market Operations sales to manage liquidity, the yield on India's benchmark 10-year government bond rose 8 basis points (Bps). The decision was made during the RBI's bi-monthly Monetary Policy meeting.

On 10:50 AM, the yield on the benchmark 7.18 percent 2033 bond was 7.2890 percent, down from 7.2140 percent close the previous day. Read here

RBI MPC meet live updates: Patra on inflation outcomes

RBI Deputy Governor Michael Patra says, "MPC has said that they are focused on aligning inflation outcomes with the target. So a tendency of the inflation numbers to move towards 4 percent is what we are looking for. If it goes below 4 percent on a durable basis, then we will shift to accommodation."

RBI MPC meet live updates: Longest transitory period in repo rate’s history, says Piramal Group

Debopam Chaudhuri, Chief Economist, Piramal Group says, "RBI has been maintaining the policy rate at 6.5% for 8 months now. The longest transitory period in repo rate’s history, when it was kept on pause prior to a cut, was 12 months, in 2014. This was followed by a 25-basis-point cut in an out of schedule meeting in January 2015. A similar event cannot be ruled out this time, especially if the impact of food prices from lower kharif acreage does not impact RBI’s forecast for overall inflation during the rest of FY24."

RBI MPC meet live updates: Absolute level of savings has increased by 14 percent, says RBI Deputy Governor Patra

RBI Deputy Governor Michael Patra: The historical average for net financial savings of households is about 7.5 percent of GDP. During the pandemic, people couldn’t spend and they built up precautionary savings and this figure rose to 11 percent of GDP. This has come down since. But absolute level of savings has increased by 14 percent. The higher financial liabilities of households is mostly going to housing.

RBI MPC meet live updates: Expected the RBI delivered a status quo policy, says HDFC Bank

Abheek Barua, Chief Economist, of HDFC Bank expected the RBI to deliver a status quo policy, keeping both its stance and policy rate unchanged. He says that the central bank also kept its growth and inflation forecast unchanged for FY24 continuing to sound cautious on inflationary risks.

"Given the pulls and pressures on liquidity conditions in the coming months, the RBI did not announce any durable liquidity absorption measures for now (like CRR hike) in line with our expectations. However, signalled that if required, they are open to the option of conducting OMO sales to manage liquidity conditions. This signals the RBI’s preference for tighter liquidity conditions going forward driven both by inflation risks and financial stability concerns as liquidity tightens globally. This also aligns with the central bank’s reiteration that they want to anchor inflation at 4% and keeping it below the upper band of the target range (at 6%) is not enough," he said.

RBI MPC meet live updates: RBI to introduce card-on-file tokenisation at bank level, says Das

The Reserve Bank of India (RBI) proposed a new facility called Card-on-File Tokenisation (CoFT) on October 6, which enables the creation of tokens for card data directly at the issuer bank level. This move was made in response to the growing acceptance and advantages of tokenisation of card data. In a statement, RBI Governor Shaktikanta Das stated that the introduction of CoFT creation facilities at the issuer bank level would be a positive step towards better data security.

What is CoFT, read in detail here.

RBI MPC meet live updates: "Governor sounded cautious about inflation"

Rajani Sinha, Chief Economist, CareEdge feels that the policy had a hawkish undertone to it. "The governor sounded cautious about inflation even though the full-year inflation projection was unchanged. It is to be noted that the governor reiterated the RBI’s commitment to bring CPI inflation down to 4% target. The RBI kept the GDP growth projection for FY24 untouched as they await additional data points to comprehensively assess the evolving dynamics," she says.

Sinha adds that the RBI remains watchful of the liquidity conditions and wants to ensure no build-up of surplus liquidity. "Hence the governor announced that RBI would consider open market operation (OMO) sale of government securities to mop up excess liquidity as required. We expect the RBI to start its rate-cutting journey from the second quarter of next fiscal year as inflation edges closer to 4% target," said Sinha.

RBI MPC meet live updates: "Do not see any major problems in central government’s finances"

RBI Governor Shaktikanta Das says, "It is not for me to comment on the government’s spending. It has a fiscal consolidation path that was announced in the Budget. There was some fiscal expansion due to the pandemic, but it was calibrated and measured. As for the fiscal consolidation path, the government has said it remains committed to it. So, as far as the central government’s finances are concerned, I do not see any major problems that worry the RBI."

RBI MPC meet live updates: RBI Deputy Governor on licences cancellation of urban co-operative banks

RBI Deputy Governor M Rajeshwar Rao says cancellation of licences of urban co-operative banks is never a sudden development. "It is only when measures to improve their health and rehabilitate them do not work is their licence cancelled," he adds.

RBI MPC meet live updates: Believe policy rates are likely to be on hold for an extended period, says AB Sun Life

RBI kept policy rates and stance unchanged in line with market expectations. Given elevated global uncertainties & volatile inflation readings, they communicated to remain nimble and alert to emerging risks to ensure price stability. We continue to believe policy rates are likely to be on hold for an extended period due to resilient growth & uncertain global outlook," says Kaustubh Gupta, Co-Head Fixed Income, Aditya Birla Sun Life AMC Limited.

RBI MPC meet live updates: Stable interest rates instil confidence, says RUloans Distribution

Kaushik Mehta, Founder & CEO of RUloans Distribution believes that the recent RBI decision to maintain the repo rate at 6.50%, with a 'withdrawal of accommodation' stance, brings promise for new home loan borrowers and others. Stable interest rates instil confidence, reducing the urgency for loan refinancing, he says.

"As the festive season approaches, this stable rate environment will impact personal and consumer loans, including those for festive shopping. Consumers are likely to leverage favorable lending conditions. Stable rates may also boost demand for homes and vehicles during this festive period, fueling economic growth," says Mehta.

"Moreover, the stable rate environment is expected to stimulate demand for business loans and Loan Against Property (LAP). Businesses needing working capital and anticipating manufacturing growth are likely to find this lending atmosphere favorable. This stability sets the stage for robust lending growth in the crucial last two quarters of the financial year, benefiting financial institutions and borrowers alike, and supporting economic stability and growth," he adds.

RBI MPC meet live updates: Africa now gets a voice in the G20 forum, says RBI Governor

Inclusion of African Union in G20 is a very welcome development. G20 is a multilateral forum and an entire continent – except South Africa – can’t be left out of it. Africa now gets a voice in the G20 forum to express their priorities and expectations.

RBI MPC meet live updates: Liquidity management framework is robust, says RBI Deputy Governor

RBI Deputy Governor Michael Patra says that the liquidity management framework is robust. "The incremental CRR was to deal with the liquidity situation created by the withdrawal of Rs 2,000 notes… The average call money rate for the month is 6.56 percent, which is near the repo rate," Patra said.

RBI MPC meet live updates: More from Das on OMO sales

RBI Governor Shaktikanta Das says OMO sales will be done through auctions and not via NDS-OM platform. So we will notify the auction. "Our liquidity management has nothing to do with bond yields going up in advanced economies," he adds.

RBI MPC meet live updates: RBI has been data driven, says Shantanu Bhargava

The RBI had overlooked data in the early aftermath of COVID since the aim was to stimulate the economy & engineer a turn-around. Since changing its stance last year, the RBI has been data driven, says Shantanu Bhargava, MD, Head of Discretionary Investment Services, Waterfield Advisors. He adds, "According to the RBI's inflation prediction for Q3 & this FY, today's policy outcome is not surprising. We expect the RBI to retain the status quo unless we see a durable drop in inflation and if steady economic activity continues."

RBI MPC meet live updates: Governor Das on liquidity

RBI Governor Shaktikanta Das says that the repo rate hikes have not fully translated into either deposit or lending rates of banks. "Liquidity is not in deficit. It went into deficit in the last 2-3 weeks due to scheduled GST, and advance tax payments. But overall, liquidity is surplus," he says, adding that Government spending has picked up and will pick up. That will add further liquidity to the system.

RBI MPC meet live updates: Warning about OMO sales has nothing to do with India’s global bond index inclusion, says Das

RBI Governor Shaktikanta Das sasy, "Warning about OMO sales has nothing to do with India’s global bond index inclusion. It is to do with domestic situation. At the moment, we do not propose to have a calendar for OMO sales."

RBI MPC meet live updates: RBI to issue framework for SRO recognition for regulated entities

As per the announcement made by RBI Governor Shaktikanta Das on October 6, a framework for the recognition of Self-Regulatory Organizations (SROs) for regulated entities (REs) is in the works. The SROs are expected to enhance compliance culture amongst their members and provide a consultative platform with the Reserve Bank for policy making, as stated by Das.

Read here

RBI MPC meet live updates: RBI remains alert to act on upside inflation risks

Aurodeep Nandi, India Economist, Nomura says, "There is an element of déjà vu to the RBI’s monetary policy – both, the policy rate and the policy stance of ‘withdrawal of accommodation’ were retained, as were the 2023-24 GDP growth and inflation forecasts, while markets were reminded that the RBI remains alert to act on upside inflation risks and that the 4% inflation target is sacred.

In contrast to the policy meeting in August, when vegetable-driven elevated inflation was the biggest near-term threat, the policy trade-offs have softened for the RBI, with growth remaining resilient, easing core inflation and headline inflation set to settle below the upper tolerance bound of 6% in September. That said, global and domestic uncertainties dictate that the RBI remains nimble and alert to the risk of higher inflation.

The RBI also flagged that liquidity remains too skewed and as in the previous policy meeting, the leash on liquidity remains tight, with the RBI stating that it may consider OMO sales. Overall, this is a hawkish pause – replayed."

RBI MPC meet live updates: Gold loan limit for urban cooperative banks doubled to Rs 4 lakh

The Monetary Policy Committee (MPC) and the Governor of the Reserve Bank of India, Shaktikanta Das, announced that urban cooperative banks can now offer gold loans under the bullet payment scheme up to Rs 4 lakh, which is twice the previous limit of Rs 2 lakh. Small and marginal borrowers will benefit from this decision, but it is important to note that this applies only to banks that have met the overall target and sub-targets under the Priority Sector Lending (PSL) as of March 31, 2023.

Read here

RBI MPC meet live updates: RBI makes no change to FY24 inflation forecast, implies sub-5% CPI in September

In a surprise move, the Reserve Bank of India (RBI) on October 6 made no change to its inflation forecast of 5.4 percent for 2023-24, although it made minor tweaks to the projections for the second and third quarters.

Interestingly, the latest forecast implies that headline retail inflation may crash to 4.9 percent in September. Here's the quarterly break-up of the inflation forecast

RBI MPC meet live updates: The Status quo considering the volatility in Global factors is a prudent call, says CSB Bank

Pralay Mondal, MD & CEO, CSB Bank says, “The Status quo considering the volatility in Global factors is a prudent call. The growth projection of 6.6% along with incremental higher credit growth will keep pressure on banks for deposits. We hope a prudent balance in OMO sales will keep the system liquidity adequate to keep the short-term rates down. Overall close watch on inflation and other high-frequency data will remain important.”

RBI MPC meet live updates: Holding repo rate at 6.5% showcases strategic & balanced approach, says Biz2Credit

Rohit Arora, CEO and Co-founder, Biz2Credit and Biz2X says, "RBI's decision to hold the repo rate steady at 6.5% showcases a strategic and balanced approach to India's economic trajectory. For fintech companies like ours, this not only provides a predictable environment but also signals a conducive atmosphere for sustained growth. It's a clear indication that the regulators are in sync with market dynamics, paving the way for Fintechs in India to innovate, expand, and contribute more significantly to the nation's financial inclusivity."

RBI MPC meet live updates: No change in stance was widely expected and par for the course, says CRISIL

Steady interest rates with no change in stance were widely expected and par for the course. Despite the second quarter bulge in inflation, the RBI kept its inflation forecast for the current fiscal unchanged at 5.4%, says Dharmakirti Joshi, Chief Economist, CRISIL.

Further, the incomplete transmission of past 250 basis-points rate hikes to bank lending and deposit rates reinforced MPC’s imperative to continue its stance of withdrawal of accommodation. Noting resilient economic conditions, the MPC kept its GDP forecast unchanged at 6.5% this fiscal.

Food inflation remains a key monitorable not only because it is in double digits, but also because sub-normal monsoon and muted sowing can impact kharif output and prices. Additionally, low reservoir levels do not augur well for the rabi crops.

Crude oil has seen a lot of volatility of late and there is a reason to be cautious on that front — more due to geopolitical factors than demand, which is slowing and unlikely to drive crude prices up.

The tightening of US bond yields, capital outflows and strengthening of the dollar also tilt the balance in favour of the ‘withdrawal of accommodation’ stance. We expect rates to remain at these levels and foresee a rate cut only in the first quarter of next fiscal.

RBI MPC meet live updates: RBI’s Monetary Policy Report says

>> CPI inflation to average 4.5 percent in 2024-25
>> GDP growth to remain stable at 6.5 percent in 2024-25

RBI MPC meet live updates: RBI to consider OMO sales to manage liquidity, say Governor Das

the Reserve Bank of India's Governor, Shaktikanta Das, announced on October 6 that the central bank is considering using open market operations (OMO) sales to manage liquidity in line with the monetary policy stance. OMO refers to the central bank's purchase or sale of government securities in the open market. The timing and magnitude of such an operation will depend on the liquidity situation as it evolves, according to Das. Read in detail, here

RBI MPC meet live updates: Key takeaways from Shaktikanta's address

The Reserve Bank of India's monetary policy committee (MPC) has maintained a lending repo rate of 6.5 percent for the fourth consecutive time, in line with its focus on controlling inflation. During the announcement, Governor Shaktikanta Das reaffirmed the RBI's policy stance of "withdrawal of accommodation", which aims to align inflation with the MPC's target while still supporting economic growth. Here are the takeaways from the policy announced today.

RBI MPC meet live updates: RBI keeping a close watch on inflation
The Indian economy is forging ahead in a challenging global environment, drawing strength from its underlying macroeconomic fundamentals and buffers. While growth remain on track, the declining trend in inflation was interrupted in July and August. Volatile food and energy prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook. We remain vigilant of the evolving inflation dynamics, said RBI guv

RBI MPC meet live updates: Our inflation target is 4% and not 2-6%, says RBI guv
Shaktikanta das said the central bank's aim is to align inflation to the target on a durable basis while supporting growth.

RBI MPC meet live updates: Card on file tokenisation now at bank level

RBI has proposed card-on-file tokenization creation facility directly at the issue bank level. This will enhance convenience for card-holders.

RBI MPC meet live updates: Cushion for NBFCs
NBFCs in middle and base layers can also use credit risk mitigation instruments to reduce their counterparty exposure under credit concentration norms.

RBI MPC meet live updates: RBI on finance framework
With a view to strengthen project finance framework, the existing prudential norms have been reviewed. Detailed draft guidelines will soon be released for comments, said Guv Das.

RBI MPC meet live updates: RBI may consider OMO sales of G-Sec to manage liquidity
RBI may consider OMO sales of government securities to manage liquidity consistent with the stance of monetary policy. The timing and quantum of such operations will depend on prevailing liquidity conditions.

RBI MPC meet live updates: RBI guv on liquidity
RBI Governor Shaktikanta Das said moderation in system liquidity has led to greater recourse of MSF by banks. There is also skewed liquidity distribution among banks. It is a turning pitch and we will play our shots accordingly.

RBI MPC meet live updates: RBI on price shocks
Guv Shaktikanta Das said appropriate and timely action is needed to prevent any spillovers from food and fuel price shocks. These are non-negotiable necessities.

RBI MPC meet live updates: No surprises, Das sticks to the script!
All the signals from the policy statement indicate that a rate cut is not in the vicinity anytime soon as the MPC is unlikely to lower the guard on the inflation front in the near future. A hawkish policy statement is logical considering that inflation continues to be the key villain in the India growth story. Between the August policy review and now, nothing much has changed on the inflation front. MPC is clearly on an inflation fighting mode
-- Dinesh Unnikrishnan, Editor, Banking & Finance

RBI MPC meet live updates: Inflation ease expected in Sept, says Guv
Das said significant easing of inflation is expected in September. But indications are that throughout October-December 2023, food inflation may not see sustained easing. This requires careful monitoring incoming data and the outlook.

RBI MPC meet live updates: Inflation forecasts from Mint Street
-- CPI inflation forecast for July-September 2023 raised to 6.4 percent from 6.2 percent
-- CPI inflation forecast for October-December 2023 cut to 5.6 percent from 5.7 percent
-- CPI inflation forecast for January-March 2024 left unchanged at 5.2 percent
-- CPI inflation forecast for April-June 2024 left unchanged at 5.2 percent

RBI MPC meet live updates: Guv das on inflation
-- Core inflation eased by around 140 basis points from its recent peak in January. Further reduction is key to price stability.
-- RBI Governor Shaktikanta Das: The future inflation trajectory will depend on many factors, although in the near term it may come down.

RBI MPC meet live updates: Key points on growth, inflation
- GDP growth forecast for July-September 2023 left unchanged at 6.5 percent
-- GDP growth forecast for October-December 2023 left unchanged at 6.0 percent
-- GDP growth forecast for January-March 2024 left unchanged at 5.7 percent
-- CPI inflation forecast for April-June 2024 left unchanged at 6.6 percent

RBI MPC meet live updates: RBI guv on inflation fight
-- Global headline inflation is easing but rules above the target of many major economies. -- Sovereign bond yields have firmed up, US dollar has appreciated, and equity markets have corrected.
-- Momentum in domestic agricultural activity in the second quarter has been maintained although monsoon was somewhat uneven.

RBI MPC meet live updates: RBI guv on status quo
-- Economic activity has remained resilient.
-- Transmission of 250 basis points increase in repo rate is still incomplete
-- MPC voted to remain focused on withdrawal of accommodation by 5 votes to 1
-- Standing Deposit Facility and Marginal Standing Facility rates also left unchanged at 6.25 percent and 6.75 percent

RBI MPC meet live: India poised to become global growth engine, says RBI guv
RBI Governor Shaktikanta Das said twin balance sheet stress of a decade ago has now been replaced by a twin balance sheet advantage.

RBI MPC meet live: DBS on CRR drawdown
The drawdown in the cash reserve ratio was being offset by advance tax and GST outflows, higher currency demand, delays in spending and intervention efforts, and keeping cash conditions tight, says Radhika Rao of DBS Bank.