RBI Monetary Policy 2024 Highlights: Guv Das says would like inflation to align with the RBI target, stay there longer

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RBI Guv Das: The quantum of gold was static in terms of what we hold outside of the country. In recent years, the Reserve bank is buying gold as part of its reserves. We have domestic capacity, so part of it should be stored in the country, nothing more should be read into it.

RBI Das: RBI has a number of instrumentalities ,we have managed it in the past, we will manage it this time also. No worries on that.

RBI DG Swaminathan: Bulk deposit revision is a routine revision we do. In our view, it is likely to have better liability management for banks in terms of classification into retail and bulk.

RBI Patra: This is the 8th consecutive time when inflation has not aligned with the target, therefore the stance which indicates the future course of policy is focused on aligning inflation to the target

Overall, the banking, NBFC and MFI sector is stable. Whenever we see any outlier, we make it very clear.

Rural demand is showing a signs of recovery.

RBI Governor: Banks should invest adequately on IT and they are. It is for the banks to asses. RBI does not prescribe how they should expend.

Efforts are on to reduce downtime in UPI: RBI DG Rabi Sankar

There is no problem from UPI or NPCI end, problem arises from banks end: RBI Governor. We are dealing with that.

RBI has a fair practices code. Bank interest rates are completely deregulated. We have seen that some are outliers and our supervision department is communicating with them and sensitizing them.

This is not a system wide problem. In some use cases, we have noticed this and we have ask for justification from them

RBI Governor: Elephant is walking very slowly, we would like to elephant to reach forest and be there. We want inflation to reach target and stay there.

RBI Patra: We will go on refining our intervention toolkit and intervene as and we feel.

RBI Governor: We are very clear that RBI is there in the forward market and we are there. Lets wait for the toolkit for intervention.

RBI Governor: The question is in the realm of speculation. I am in no position to comment on fiscal consolidation at the moment.

We are not seeing signs of overheating in terms of growth. Nothing in off the table in context of rate hike or cut.

Even if the US Fed eases, we may not.

I just reiterated my stance.

The Reserve Bank of India (RBI) on June 7 changed the definition of bulk deposits for scheduled commercial banks and small finance banks (SFB) to Rs 3 crore.

“On a review of bulk deposit limits for banks, it is proposed to revise the definition of bulk deposits as single-rupee term deposit of Rs 3 crore and above for scheduled commercial banks and SFBs, excluding regional rural banks,” RBI Governor Shaktikanta Das said in his monetary policy committee (MPC) statement.

Inflation is on a downhill drive across the globe, but the final leg of the disinflation journey may be bumpier, according to Reserve Bank of India (RBI) Governor Shaktikanta Das.

“Inflation is easing, but the final leg of this disinflation journey may be tough,” Das said while delivering the monetary policy statement on June 7.

The Reserve Bank of India on Friday proposed to bring UPI Lite within the ambit of the e-mandate framework by introducing an auto-replenishment facility for loading the mobile wallet when the balance goes below a threshold set by the user.

It means that if the user has a floor of Rs 500 on her UPI Lite wallet, then if the balance goes below Rs 500, the wallet will automatically be loaded to Rs 2,000, the maximum limit of UPI Lite wallet.

Sensex and Nifty extended their morning gains and rose over 1 percent around noon of June 7 after the Reserve Bank of India's Monetary Policy Committee raised India's FY25 real GDP forecast to 7.2 percent from the earlier 7 percent.

The MPC also decided to keep the policy rates unchanged at 6.5 percent, aligning with market expectations.

Some microfinance institutions and non-banking financial companies (NBFC) are charging high interest rates on small-value loans, the Reserve Bank of India (RBI) Governor Shaktikanta Das pointed out in the monetary policy review on June 7.

“It has been observed that in some MFIs and NBFCs, interest rates on small value loans are high and appear to be usurious,” Das said.

Home loan interest rates and equated monthly installments (EMIs) will remain unchanged for borrowers as the Reserve Bank of India (RBI) on June 7 decided to hold the repo rate steady at 6.5 percent for the eighth time in a row.

Since October 1, 2019, banks have linked all retail floating-rate retail loans to an external benchmark, which is the repo rate in most cases. So, any changes in the repo rate directly influence the interest rates on these loans.

Rationalisation of guidelines for export and import of goods and services under FEMA

Next edition of Harbinger 2024 - the global hackathon - with two themes, zero frauds and being divyang friendly will be launched soon

To introduce auto replenishment of UPI-Lite wallet

Propose setting up of a digital payments intelligence platform for real-time data sharing across the system

FPI flows surged in FY24 with an inflow of $41.6 billion

It has been observed that in some MFIs and NBFCs, interest rates on small value loans are high and appear to be usurious.

Gross FDI remains robust, net FDI moderated

Robust services export growth - led by software exports - has ensure CAD has moderated

Rise of GCCs has provided a boost to India's software and services exports

CAD for FY25 expected to remain well within sustainable level

Customer protection remains top of RBI's priority

Prudent balance between asset and liabilities must be maintained

Banking system sound and resilient backed by asset quality, see rise in profitability; NBFCs displayed strong financials in FY24

Recent data suggest there is moderation in loans and advances in unsecured lending after RBI flagged it last year

Looking ahead, RBI will continue to be nimble in liquidity mgmt; will deploy resources to ensure money market rates evolve in an orderly manner, says Guv Das.

RBI stands committed to maintain stability and orderliness in all segments regulated by it

RBI transferred Rs 2.11 lk cr to Govt as dividend, central board decided to increase the risk provisioning to 6.5% of RBI b/s

Higher risk provisioning will strength RBI's b/s, prudence at the core of RBI's action

Indian rupee moved in a narrow range despite FPI outflows.

There is a view that in matters of monetary policy, the RBI is guided by the principle of 'follow the Fed'; I would like to state that while we do keep a consider the impact of advanced economies on India, our actions are primarily determined by domestic growth, inflation conditions and the outlook

Supply side development, Govt measures have contributed to the disinflationary trend

CPI Inflation projections remain unchanged from April monetary policy's projections

Uncertainty over food price outlook and spillover risk to inflation needs to be watched

RBI projects CPI inflation at 4.5% for FY25

Inflation projection retained for the fiscal as it was in last MPC

CPI inflation Q1- 4.9%, Q2 -3.8%, Q3 - 4.6%, Q4 - 4.5%

CPI headline softened further in March-April, but food inflation persists

Projections: Q1 7.3, Q2 7.2, Q3 7.3, Q4 7.2

Pvt consumption recovering, revival in rural demand getting fillip from farm activities

Non-oil, non-gold imports are in the positive, Services growth rebounding.

IMD's forecast is expected to improve Kharif output

Healthy b/s of banks and corporates augurs well for economic activity

Global growth sustaining in 2024, likely to remain resilient

Market expectation on timing and pace of rate cut is changing based on incoming data

Domestic eco activity in FY25 has remained resilient

RBI keeps repo rate unchanged at 6.50%. 4:2 majority decided to keep repo rate unchanged.

Majority MPC focused on withdrawal of accommodation

Deflation in fuel prices ongoing, MPC took note of this but remains vigilant to any upside risk

The pattern of world crisis continues, but India is seeing positive growth. But we need to stay vigilant against new challenges.

The IMD warning and alerts on heatwave across various regions may have had an impact on RBI's inflation management. That's because cascading effects on food prices impacting production of certain crops including wheat and also higher power demand above supply during the summer season. This is a major upside risk to the central bank's inflation management. Will governor Das comment on heatwave impact on inflation this time? Dinesh Unnikrishnan- Editor, Banking, Moneycontrol.

RBI Governor Shaktikanta Das to announce decision shortly at 10am.

The RBI began its three-day monetary policy committee (MPC) meeting on June 5 and will share its decision on June 7. The last time RBI hiked its interest rate was in February 2023.

GDP growth robust on back of solid investment demand, which is supported by healthy balance sheets of banks and corporates.

MSPs for both kharif and rabi seasons 2023-24 ensured minimum return of 50% over cost of production for all crops, the report further said.

RBI had a net income of Rs 2.11 lakh crore in the financial year 2024, up from Rs 87,420 crore in the previous year with a jump in interest income from foreign securities, its annual report released said.

The Reserve Bank of India saw a gain of Rs 83,616 crore from foreign exchange transactions during the year, while interest income from foreign securities rose to Rs 65,328 crore, which allowed it to increase the size of its contingency fund, the report showed.

Indian bond yields have retreated in recent weeks, and Jajoo expects market yields to soften further if the guidance turns more supportive.

Furthermore, the US Federal Reserve's policy decision on June 12 may also influence market sentiment, noted Sunil Damania, Chief Investment Officer at MojoPMS.

While a rate cut is ruled out, all eyes are on the MPC's comments on policy stance. A change in the policy stance to 'neutral' will indicate willingness within MPC to relook the rate approach. Will that happen today? Considering that retail inflation is still far away from the medium term target, chances are unlikely. Dinesh Unnikrishnan, Editor, Banking, Moneycontrol.

Additonally, investors will keenly watch out if there is any fresh measure to address current liquidity squeeze, said Mahendra Kumar Jajoo, CIO-Fixed Income of Mirae Asset Investment Managers.

"Liquidity has remained in deficit with a fresh build-up of cash balances with the government of India. However, govt spending is expected to pick up with elections getting over soon.

Further, flows associated with the inclusion of Indian government bonds in the JPMorgan index are also scheduled to start pouring in from June," he said.

Till the counting day, most pollsters predicted a clean sweep for the BJP in the elections.

The final verdict came as a surprise with Congress-led INDIA bloc managing to get 232 seats. As the BJP is expected to form government with support of two powerful regional allies—TDP and JDU—this is set to be a coalition regime.

If the government switches gears to a populist budget yielding to pressure from allies, this could have ripple effects on inflation management. The MPC/RBI may have to then stay on a hold mode longer than expected.

This is th first monetary policy after the results announcement of 2024 general elections. One of the assumptions for the RBI's current inflation projection is government's continued focus on fiscal consolidation roadmap. The surprise verdict on June 4 that implies a coalition government. There are chances of a populist tone in the upcoming budget which may have implications on the inflation scenario as well. If the government resort to a spending push , lowering the fiscal deficit may take longer than expected time. Will the RBI governor give a sound of caution to the new government on fiscal prudence? Let's wait and watch.- Dinesh Unnikrishnan, Editor, Banking, Moneycontrol.

A surge in the global crude oil prices in the event of an escalation in the Israel-Iran conflict, coupled with the impact of a possible heat wave across India that may trigger a spike in food inflation.

This could also upset the inflation calculation of India’s rate-setting panel.

As Indian markets navigate volatility of election verdict clamor, market participants will now shift their focus to the Reserve Bank of India's (RBI's) monetary policy decision due on June 7.

Analysts expect the central bank to maintain status quo for the eighth consecutive time, keeping interest rates unchanged at 6.5 percent, making the policy decision a non-event for the markets.

Even as several market experts expect the RBI to start cutting rates only from the third or fourth quarter of FY25, the June MPC will be an important one to map out RBI Governor's commentary on inflation trajectory and future rate cut path.

As per rating agency ICRA, the food and beverages inflation will retrace above the 8-percent-mark in May 2024, partly on account of the adverse base as well as the above-normal temperatures and heatwave conditions during the summer season.

This would push up the headline CPI inflation to a five-month high of 5.1-5.2 precent in the ongoing month.

Inflation has been easing but still stays above where the central bank wants it to be.

Headline retail inflation stayed largely unchanged at 4.83 percent in April against a 10-month low of 4.85 percent in March.

Inflation has been easing but still stays above where the central bank wants it to be.

Headline retail inflation stayed largely unchanged at 4.83 percent in April against a 10-month low of 4.85 percent in March.

On the liquidity front, the last two months have seen lots of volatility with banking system liquidity moving between a deficit and a surplus.

This has resulted in erratic movement in overnight rates between the corridor's lower (6.25 percent) and higher range (6.75 percent).

Banking regulator RBI has on May 30 released its annual report for 2023-24, highlighting that macro-economic fundamentals remain strong, with headline inflation expected to moderate further.

The RBI flagged risks to food inflation saying that it remains vulnerable to supply-side shocks. The MPC will remain resolute in its pursuit of price stability, the annual report said.

Recently, RBI governor Shaktikanta Das said the Consumer Price Index (CPI) inflation was on a downward trajectory but the central bank was focused on a 4 percent target on a sustainable basis.

“We would like inflation to be durably around 4 percent. It has to be sustainably and durably 4 percent. That will give us greater confidence. Direction is clear, inflation is on a downward trajectory,” Das said in an interview to a private television channel.

On the growth front, India's economy grew at 8.4 percent, its fastest pace in 18 months, in the final three months of 2023, led by strong manufacturing and construction activity.

The government has revised its growth estimate for 2024 to 7.6 percent from 7.3 percent.

Headline inflation has eased in the recent months. At 5.09 percent in February, inflation stayed largely unchanged from 5.1 percent in the previous month.

Core inflation eased to 3.3 percent. Core inflation refers to the non-food, non-oil part of inflation, a key measure of price trends used for policy formulation.

The overall inflation print is, however, yet to align with the central bank’s 4 percent target.

The Reserve Bank of India's monetary policy committee (MPC) on April 5 left the key repo rate unchanged at 6.5 percent for the seventh time in a row, in line with the market expectations, with its focus firmly on bringing inflation down.

In its first meeting of FY 25, the rate-setting panel left the stance unchanged as withdrawal of accommodation. The decisions were takes with a 5:1 majority.

The RBI Governor also announced that there will be no changes in the GDP growth forecast for FY25. The GDP growth estimate was retained at 7 percent for the current fiscal year. On the inflation front, the RBI MPC sees it at 4.5 percent for FY25.

A majority of experts said that the central bank will maintain its ‘withdrawal of accommodation’ stance.

However, two economists said it will be changed to `neutral.'

The election results, which did not throw up a clear mandate for any party, are unlikely to have any bearing on the stance of the Monetary Policy Committee (MPC), as the MPC's decisions are based on domestic and global economic conditions, experts said.

“As of now, the new political equation doesn't change anything much for the RBI (Reserve Bank of India) in the immediate run, as the political dust is yet to fully settle. The RBI is unlikely to change its view on broad macro contours on account of this,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services.

Experts said that the government's fiscal consolidation will not be derailed, thanks to robust revenue collection and higher-than-expected dividend from the RBI.

Madhavi Arora said the net fiscal impulse has been restrictive for growth over the last few years, and there is no merit in the government cutting its FY25 fiscal target by an additional 0.4 percent of GDP using the RBI bonanza.

The economists suggested that the central bank will look at rate cuts post the October 2024 MPC policy.

“The policy space to remain on pause is provided by strong domestic growth conditions with FY24 GDP likely to be closer to 8 percent. The RBI rate cut cycle is expected to start from October at the earliest,” Sengupta said.

Rao of DBS said, “With a limited near-term need to shift to a dovish gear, the RBI is likely to join its regional peers to stay on hold this year”.

The share of capex in the total expenditure of the central government has increased from 12.5 percent in 2019-20 to 23.3 percent in the 2024-25 interim budget.

However, Madhavankutty said that the capex target should remain intact as the bonanza from surplus transfers and dividends will help take care of any welfare packages that may be necessitated due to coalition politics.

"Also, the monsoons are expected to be better this year and there won't be much pressure on the MSP (minimum support price) and subsidy fronts. The capex should remain where it is," he said.

A majority of the experts believe that the central bank will maintain its projection of India's GDP. “GDP projections are expected to remain flat,” said Rajeev Pawar, Head Of Treasury - Ujjivan Small Finance Bank.

According to Achala Jethmalani, Economist, RBL Bank, FY24 GDP data have belied street expectations each time and the odds are high it could be the case this time around too.

"However, basis statistical trends and lead indicators, we think the Q4FY24 GDP growth is likely to be more normalised at 6 percent YoY, after a record GDP print of around 8.4 percent YoY in Q3FY24," said Jethmalani.

Economists and bankers said that the central bank is likely to maintain its inflation forecast unchanged due to moderating headline inflation and the favourable monsoon forecast by the IMD.

Swati Arora, Economist, HDFC Bank, said the RBI is likely to retain its growth and inflation projections for FY25.

"Inflation has also eased marginally to 4.83 percent for the month of April. This positive momentum is expected to continue," said Hardika Shah, Founder and Chief Executive Officer, Kinara Capital.

Experts have mixed views regarding the government's capital expenditure plans.

While some say the government will continue with the capex that was announced in the interim budget, others feel the government will channelise more funds towards revenue expenditure.

"Yes, one can expect some changes in the spending pattern of the government after the poll verdict. More funds may be channelised towards revenue expenditure," said V Ramachandra Reddy, DGM and Head, Treasury, Karur Vysya Bank.

Radhika Rao, Executive Director and Senior Economist, DBS Bank, said that that policy commentary is likely to acknowledge the recent stability in the headline inflation and the favourable monsoon forecast by the IMD.

"The approach will be balanced with a cautious tone on the fallout on food from extreme weather events, including the recent heatwave, and risks of higher oil on geopolitics," Rao said.

We recently saw India’s rating outlook changing to “positive” from “neutral” by the S&P although the sovereign credit rating has remained unchanged at BBB-.

This indicates policy stability, increase in investment and long-term growth prospects.

S&P hinted at a rating upgrade by mentioning that it will keep a check on government policies for the next two years by focusing on India’s fiscal deficit reduction target.

The Indian government is looking to reduce its fiscal deficit to 4.5 percent by March 2026.

This will be with a recent large dividend from the RBI reducing risk to government finances.

On the liquidity front, the last two months have seen lots of volatility with banking system liquidity moving between a deficit and a surplus.

This has resulted in erratic movement in overnight rates between the corridor's lower (6.25 percent) and higher range (6.75 percent).

India's retail inflation eased marginally to hit an 11-month low of 4.83 percent on an annual basis in April as compared to 4.85 percent in the previous month.

The number has remained within the Reserve Bank of India's (RBI) tolerance band of 2-6 per cent

However, in its past few commentaries, the RBI has maintained that its target is to get headline inflation below 4 percent on a durable basis.

Headline consumer price index (CPI) inflation is trending lower, however, and remained above the RBI’s target of 4 percent.

GDP growth for the January-March quarter (the last quarter of the last fiscal year) had exhibited the same pattern as the previous quarter.

India’s PMI dropped to 57.5 in May from 58.8 in April. It is still above 50, which indicates economic expansion.

Repo Rate: The repo rate, at which the central bank lends short-term funds to banks, stands at 6.5 percent. The central bank has kept it unchanged since April 2023.

Monetary Policy Stance: The RBI's policy stance indicates the thinking within the MPC, the rate-setting panel. Currently, its stance is of withdrawal of accommodation.

GDP growth target: A majority of the experts believe that the central bank will maintain its projection of India's GDP.

Inflation target: Economists and bankers said that the central bank is likely to maintain its inflation forecast unchanged due to moderating headline inflation and the favourable monsoon forecast by the IMD.

Rate cut: The economists also suggested that the central bank will look at rate cuts post the October 2024 MPC policy.

The election results, which did not throw up a clear mandate for any party, are unlikely to have any bearing on the stance of the Monetary Policy Committee (MPC), as the MPC's decisions are based on domestic and global economic conditions, experts said.

“As of now, the new political equation doesn't change anything much for the RBI (Reserve Bank of India) in the immediate run, as the political dust is yet to fully settle. The RBI is unlikely to change its view on broad macro contours on account of this,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services.

The Monetary Policy Committee (MPC) led by the Reserve Bank of India (RBI) is likely to maintain status quo in the upcoming June monetary policy while remaining cautious on inflation, according to Moneycontrol’s poll of 20 economists and bankers.

A majority of experts said that the central bank will maintain its ‘Withdrawal of Accommodation’ stance. However, two economists said it will be changed to neutral.