RBI MPC highlights: RBI keeps repo rate unchanged, retains FY26 GDP growth forecast at 6.5%

*Inflation is much lower than projected earlier due to volatile food prices especially in vegetables

* RBI cuts FY26 CPI inflation forecast to 3.1% from 3.7% earlier

* As transmission to money markets have been faster, large corporates increasingly have relied on market based instruments such as bonds to source funds

*FY26 inflation outlook more benign than June; RBI cuts Oct-Dec CPI inflation forecast to 3.1% from 3.9% earlier; RBI cuts Jul-Sept CPI inflation forecast to 2.1% from 3.4% earlier; RBI cuts FY26 CPI inflation forecast to 3.1% from 3.7% earlier

*To allow investors to invest in treasury bills through SIP; to standardise norms for settlement of claims in bank accounts

* Domestic growth holding up, in line with assessment; growth in industrial sector subdued, uneven; services sector expected to remain buoyant in coming months

* Taken decisive, forward looking measures to support growth; retains FY26 GDP growth forecast at 6.5%; retains Apr-Jun GDP growth forecast at 6.5%; retains Jan-Mar GDP growth forecast at 6.3%; retains Oct-Dec GDP growth forecast at 6.6%

* Headwinds from global uncertainty pose risk to growth view; headwinds from geopolitical tensions pose risk to growth view

* CAD expected to be sustainable in FY26; India's share in world's services trade has risen; Gross FDI remained strong Apr-May, net FDI moderated

* Net FPI outflows $0.8 bln Apr-Jul 31; Saw net FPI outflows majorly on debt outflows; Net inflows from ECBs higher over last year

* FX reserves cover 11 months on merchandise imports; India's FX reserves at $688.9 billion; India's share in world's services exports growth to 4.3% in 2024; Merchandise trade deficit widened in Apr-Jun

*CPI inflation is likely to edge up above 4% in Q4; Inflation expected to go up from Q4FY26; Unfavourable base effect, demand-side factors to push up CPI; Core inflation likely to remain above 4% this year

*Risks to inflation forecasts are evenly balanced; Core inflation seen moderately above 4% for FY26; Core inflation steady around 4% as anticipated; Inflation lower than before, mainly due to food prices

*Uncertainty of tariff still evolving; Uncertainties call for holding repo rate unchanged; Outlook, uncertainties suggest holding rate is better

*To maintain close vigil on incoming data; Some high-frequency data showed mixed signals Apr-May; Some data showed mixed signals in May-Jun

* Steady monsoon helping sowing activity; Steady southwest monsoon supporting kharif sowing; Construction activity exhibits resilience

*System liquidity in surplus of Rs 3 lakh crore/day since Jun MPC; CRR cut from Sept to further support liquidity conditions

*MSF, Bank rates remain unchanged at 5.75%; SDF rate at 5.25%

*Comfortable liquidity has reinforced rate cut transmission; Rate cut transmission reinforced in bond, credit mkts; Will continue to be nimble, flexible in liquidity mgmt.

* Transmission to lending rates broad based across all sectors; Will maintain sufficient liquidity in banking system; Weighted average lending rate on loans down 39 bps

* To ensure system liquidity enough to meet productive econ needs; Internal working group on liquidity mgmt framework gave report; Will publish LAF review panel report soon

* To upload liquidity mgmt framework working group report on website; Working group mooted continuing weighted avg call rate as aim

* Working group suggested to continue with VRR, VRRR auctions; System-level parameters of NBFCs sound;

* Rate transmission to money markets faster; Credit to econ rose to Rs 34.8 trillion FY25, up Rs 0.9 trillion YoY; Transmission faster, cos turned more to markets for funds

* To expand functionality in RBI Retail Direct