The RBI six-member Monetary Policy Committee (MPC) is scheduled to meet from February 6 to 8. Here is a timeline of MPC meetings this fiscal year and announcements by the central bank on the repo rate.
The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) is scheduled to meet from February 6 to 8. Per the economists, the central bank is expected to keep the repo rate unchanged for the sixth consecutive time at 6.5 per cent to meet the 4 per cent consumer price-based inflation (CPI) target.
What is the repo rate though? When banks need money, they approach the RBI. The rate at which the banks borrow the money from the central bank is called the repo rate. For such borrowing, banks have to pledge certain government securities. The long form of the repo rate is ‘Repurchase Rate’. A higher repo rate means a higher cost of borrowing for the short-term needs of the banks. Based on this, banks usually charge the rate of interest for its consumers. In case banks are unable to repay the loan, the RBI can sell these pledged Government Securities in the open market and recover the amount.
The RBI had last increased the repo rate by 25 basis points (bps) on February 8, 2023, to 6.5 per cent. One basis point is one-hundredth of a percentage point. The RBI MPC had announced the repo rate at 6.25 per cent during its December 2022 meeting. If the RBI maintains the status quo in the upcoming policy, it would mark one full year of the repo rate remaining steady at 6.5 per cent. While majority of economists and experts are of the view that RBI is likely to keep interest rates unchanged after its monetary policy review this week in its ongoing battle against inflation, some of them said that a fiscally prudent interim budget and signs of global monetary easing may lead to the central bank to soften its stance on tight liquidity conditions which have pushed borrowing costs above policy rates.
Here is a timeline of MPC meetings this fiscal year and announcements by the central bank on the repo rate.
6th April 2023: During its April 2023 meeting, the RBI MPC decided not to hike the country’s repo rate, keeping the key lending rate at 6.5 per cent unanimously. The RBI MPC, with a 5:1 majority, maintained the withdrawal of accommodation stance, RBI Governor Shaktikanta Das had said. The RBI had also stated the real GDP growth projection for FY24 was at 6.5 per cent. However, fears of sustained core inflation remain persistent on weather-related vagaries, OPEC+’s surprise announcement and rising commodity prices.
8th June 2023: The RBI governor, during its June 2023 meeting, had said that the MPC has decided to keep the key policy repo rate unchanged at 6.5 percent. “MPC also decided by a majority of five out of 6 members to remain focused on withdrawal of accommodation to ensure inflation aligns with the target while supporting growth,” RBI Governor Shaktikanta Das had said. RBI recognises that the pace of global economic activity is expected to decelerate on the back of elevated inflation, geo-political tension and tight financial conditions, he had stated. He also said that the standing deposit facility rate remained at 6.25 per cent, and marginal standing facility rate and bank rate remained unchanged at 6.75 per cent.
10th August 2023: After its three days meeting in August, the RBI governor said that the MPC decided to keep the key policy repo rate unchanged at 6.5 per cent, maintaining status quo for the third time in a row. The MPC voted in 5:1 majority to maintain the ‘withdrawal of accommodation’ stance to ensure that inflation progressively aligns with the target, while supporting growth, Shaktikanta Das had said. “Consequently, the standing deposit facility (SDF) rate remains at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent,” he had added. He had further added that the global growth will remain low by historical standards for the next few years and if warranted, RBI is prepared to act.
6th October 2023: After its fourth bi-monthly meeting in October, RBI MPC had announced that the central bank decided to keep the repo rate unchanged at 6.50 per cent and stance of ‘withdrawal of accommodation. The RBI governor had said, “After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, RBI’s Monetary Policy Committee decided unanimously to keep the policy repo rate unchanged at 6.5 per cent.” The RBI MPC had also mained FY24 GDP target at 6.5 per cent. “GDP to soften in subsequent quarters in FY24 with Q4 growth seen around 5.7 per cent,” he had said.
8th December 2023: During its December meeting, the RBI MPC had announced its decision to keep the repo rate unchanged at 6.50 per cent. This was the fifth meeting wherein the MPC decided to maintain the status quo on the repo rate. “The Reserve Bank of India’s Monetary Policy Committee after a detailed assessment of the evolving macroeconomic developments, has decided unanimously to keep the repo rate unchanged at 6.5 per cent,” RBI Governor Shaktikanta Das had said, amid India’s better-than-expected economic growth. The RBI governor had said that FY24 real GDP growth was projected at 7 per cent. Real GDP growth for the next year was projected at 6.7 per cent in Q1, 6.5 in Q2 and 6.4 in Q3.
Source:financialexpress.com