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RBI MPC Meeting Highlights: Apart from maintaining repo price unmodified and reducing CRR, the RBI has actually elevated collateral-free farming financings limitation for farmers to Rs 2 lakh and enabled tiny money financial institutions for UPI credit limit.
RBI MPC Meeting December 2024: CRR Reduced To 4%
RBI Policy Today: In line with assumptions, the Reserve Bank of India (RBI) on Friday revealed a status on the repo price at 6.5 percent, while maintaining the position as‘neutral’ This is the 11th time that the RBI MPC has actually maintained the repo price unmodified considering that February 2023. The RBI changed downward the GDP development projection to 6.6 percent from 7.2 percent previously for the present fiscal year 2024-25, and elevated the rising cost of living estimate from 4.5 percent to 4.8 percent.
Presenting the most recent bi-monthly financial plan declaration, Das on Friday stated, “The MPC thinks that just with long lasting rate security can solid structures be safeguarded for high development. The MPC continues to be dedicated to recovering the rising cost of living development equilibrium in the general rate of interest of the economic climate.”
RBI MPC December 2024: Repo, Reverse Repo, CRR, Bank Rate
While the RBI MPC kept the repo rate unchanged at 6.5 per cent, the central bank reduced the cash reserve ratio (CRR) by 50 basis points to 4 per cent. It will free up an additional Rs 1.16 lakh crore in the banking system, providing much-needed relief to lenders.
A basis point is a 100th of a percentage point. CRR is the percentage of a bank’s total deposits that must be kept in cash with the RBI.
Apart from this, reverse repo rate, bank rate, SDF and MSF remain unchanged at 3.35 per cent, 6.75 per cent, 6.25 per cent, and 6.75 per cent.
The repo rate is the rate at which the RBI lends money to the commercial banks, whereas the reverse repo rate on commercial banks’ deposits with the RBI.
FY25 GDP Growth Forecast Lowered To 6.6%
The RBI on Friday revised downwards the GDP growth projection for the current financial year 2024-25 to 6.6 per cent, compared with 7.2 per cent earlier. It comes after the latest Q2 GDP growth slowed to a seven-quarter low of 5.4 per cent.
“Growth in real GDP in Q2 at 5.4 per cent turned out to be much lower than
anticipated. This decline in growth was led mainly by a substantial deceleration in industrial growth,” Das stated.
On the overview, the RBI guv stated high-frequency indications offered thus far recommend that the stagnation in residential financial task bad in Q2:2024 -25, and has actually considering that recouped, assisted by solid joyful need and grab in country tasks.
“Notwithstanding the current aberration in the development and rising cost of living trajectories, the economic climate proceeds its trip on a continual and well balanced course in the direction of progression,” Das said.
The RBI projects the real GDP growth for 2024-25 at 6.6 per cent, with Q3 at 6.8 per cent; and Q4 at 7.2 per cent. Real GDP growth for Q1:2025-26 is projected at 6.9 per cent; and Q2 at 7.3 per cent
FY25 Inflation Projection Raise To 4.8%
The RBI raised the inflation forecast for FY25 to 4.8 per cent as against 4.5 per cent earlier.
“Inflation increased sharply in September and October 202421 led by an unanticipated increase in food prices… In the near term, despite some softening, lingering food price pressures are likely to keep headline inflation elevated in Q3,” Das stated in the plan declaration.
The reserve bank projections CPI rising cost of living for 2024-25 at 4.8 percent, with Q3 at 5.7 percent; and Q4 at 4.5 percent. CPI rising cost of living for Q1:2025 -26 is forecasted at 4.6 percent; and Q2 at 4.0 percent. The threats are equally well balanced.
Additional Measures:
UPI: Small Finance Banks Allowed To Sanction Credit Lines
The RBI on Friday enabled tiny money financial institutions to prolong credit limit via UPI. Credit line on UPI was released in September 2023 and was offered via arranged business financial institutions (SCBs).
“It has actually currently been determined to allow tiny money financial institutions additionally to prolong pre-sanctioned credit limit via the UPI. This will certainly better strengthen monetary incorporation and boost official credit rating, especially for ‘new to credit’ consumers,” said Das.
Collateral-Free Agriculture Loan Limit Hiked To Rs 2 Lakh
In a major move to support farmers, the Reserve Bank of India of Friday raised the limit for collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh per borrower. The move will enhance credit availability for small and marginal farmers.
“Taking into account the rise in agricultural input costs and overall inflation, it has been decided to increase the limit for collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh per borrower. This will further enhance credit availability for small and marginal farmers,” Das stated.
The limitation for collateral-free farming financings was last changed in 2019.
FX-Retail Platform To Be Linked With NPCI’s Bharat Connect Platform
The RBI on Friday made a decision to connect FX-Retail system with the Bharat Connect system of the NPCI.
The FX-Retail system was released in 2019.
“This would certainly make it possible for individuals to negotiate on the FX-Retail system via mobile applications of financial institutions and non-bank settlement system suppliers. This will certainly broaden the reach of FX-Retail system, boost customer experience and advertise justness and openness in prices with ample safeguards,” Shaktikanta Das said.
RBI Introduces Secured Overnight Rupee Rate
The RBI introduced the Secured Overnight Rupee Rate (SORR), a new benchmark based on all secured money market transactions, including overnight repo rate and TREPS.
It is aimed at further developing the interest rate derivatives market in India and improving the credibility of interest rate benchmarks, the RBI governor said.
Connect 2 Regulate
The RBI announced to roll out a new section on its website ‘Connect 2 Regulate’ for stakeholders to share their ideas and inputs on specific topics.
RBI’s Podcast Facility
The Reserve Bank said it proposes to add ‘podcasts’ to its communication toolkit for wider dissemination of information.
RBI’s AI Platform
The RBI decided to set up a committee comprising of experts from diverse fields to recommend a Framework for Responsible and Ethical Enablement of AI (FREE-AI) in the financial sector.
The RBI said the financial sector landscape is witnessing rapid transformation, enabled by technologies such as AI, tokenisation, Cloud Computing, etc.
