RBI keeps benchmark interest rate unchanged for 10th time in a row at 6.5 pc
The Reserve Bank of India (RBI) has kept the policy rate unchanged at 6.5% for the 10th time, emphasizing caution amid inflation concerns. Despite global rate cuts, the RBI signals a neutral stance, monitoring inflation and projecting 7.2% GDP growth for FY25.
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FollowThe Reserve Bank of India (RBI) has decided to keep the policy rate unchanged at 6.5% for the 10th consecutive time. This decision was announced during the RBI’s fourth bi-monthly monetary policy review for the current financial year, with the central bank signalling a cautious approach amid concerns over inflation and global economic uncertainty.
RBI Governor Shaktikanta Das revealed that five out of the six members of the Monetary Policy Committee (MPC) voted in favour of maintaining the status quo. Despite the U.S. Federal Reserve and several developed nations reducing their interest rates, the RBI opted to keep India's repo rate steady. The MPC also shifted its stance to 'neutral,' hinting that a potential rate cut could be on the horizon in upcoming policy reviews.
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Das emphasized that the RBI remains focused on ensuring that inflation remains aligned with the central bank’s target. He acknowledged that elevated food prices are still a concern, but India’s economic growth continues to show strength. The central bank will closely monitor inflation, especially with global factors playing a key role in pushing up prices.
This policy review marks the first meeting of the newly reconstituted MPC, which now includes external members Ram Singh, Saugata Bhattacharya, and Nagesh Kumar. These members were appointed by the government last month.
Despite the central bank’s cautious stance, India’s economy continues to perform well. The real GDP growth for the first quarter of the current fiscal year stood at 6.7%, driven largely by a rebound in private consumption. Gross Value Added (GVA) during the same period increased by 6.8%. Other significant economic indicators, such as the manufacturing Purchasing Managers' Index (PMI) at 56.5 and the services PMI at 57.7 for September, indicate ongoing expansion in these sectors.
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In conclusion, the RBI has chosen stability in its monetary policy, maintaining the benchmark interest rate at 6.5% to support economic growth while keeping inflation in check. The central bank has forecasted real GDP growth of 7.2% for FY25, with inflation projected at 4.5% for the same period. The standing deposit facility (SDF) rate remains unchanged at 6.25%, while the marginal standing facility (MSF) and the bank rate stand steady at 6.75%.
Financial experts have welcomed this cautious approach. Dharmendra Raichura, Vice President and Head of Finance at Ashar Group, noted that maintaining the current rates promotes stability, supporting economic growth while controlling inflation. He added that the RBI’s optimistic GDP and inflation forecasts reflect the central bank’s confidence in the country’s financial stability.
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