Mumbai: The Reserve Bank of India on Friday decided to keep the policy rate unchanged for the 11th time in a row but sharply lowered the GDP growth forecast to 6.6 percent for the current fiscal, as against an earlier projection of 7.2 percent.
The Reserve Bank of India (RBI) maintained the status quo on interest rates despite the July-September quarter GDP growth falling to a 7-quarter low of 5.4 percent, as against its own projection of 7 percent.
The rate increase cycle was paused in April last year after six consecutive rate hikes, aggregating to 250 basis points since May 2022.
Announcing the fifth bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 percent while keeping the policy stance unchanged at neutral.
He said MPC will remain watchful of incoming macroeconomic data for future action.
The RBI sharply cut the GDP growth projection to 6.6 percent from the earlier level of 7.2 percent, while raising the inflation target to 4.8 percent from the previous projection of 4.5 percent for the current fiscal.
In a bid to make available more money with banks for lending so as to boost economic activity, the RBI slashed the Cash Reserve Ratio to 4 percent from the existing 4.5 percent. This would lead to the release of Rs 1.16 lakh crore to banks and improve their lending capacity.
The CRR is the percentage of a bank’s total deposits that it is required to maintain in liquid cash with the RBI. The CRR percentage is determined by the RBI from time to time. Banks do not get any interest on this amount.
The government in October reconstituted the Reserve Bank’s rate-setting panel — Monetary Policy Committee (MPC). This was the second MPC meeting of the reconstituted panel with three newly appointed external members — Ram Singh, Saugata Bhattacharya and Nagesh Kumar.
