RBI MPC keeps repo rate unchanged at 6.5% for 5th straight policy review

The central bank raised the GDP growth forecast for FY24 to 7% from 6.5%

The Reserve Bank of India’s (RBI) Monetary Policy Committee decided to keep the repo rate unchanged at 6.50 per cent for the fifth consecutive policy review. The RBI also decided to maintain its policy stance at "withdrawal of accommodation".

The central bank raised the GDP growth forecast for FY24 to 7 per cent from 6.5 per cent, whereas retail inflation forecast for the current fiscal was retained at 5.4 per cent.

Das said the overall tightening of liquidity meant that the need to conduct open market sale of government bonds has not arisen so far. In the previous policy statement in October, the governor had said that the central bank will consider OMO sales to manage liquidity.

Further, Das announced the proposal to permit the reversal of liquidity facilities under the Standing Deposit Facility and Marginal Standing Facility during weekends and holidays effective December 30, 2023, in order to enhance fund management for banks. This measure will undergo review after six months, or earlier, if necessary.

"We propose to allow reversal of liquidity facilities under both Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) even during weekends and holidays with effect from December 30, 2023," said Das in his monetary policy statement.

Governor Das also revealed plans for a unified regulatory framework on connected lending for all regulated entities of the RBI, aiming to bolster credit pricing and management. The RBI proposed a regulatory framework for web aggregation of loan products to enhance transparency in digital lending.

In a forward-looking move, the RBI suggested the establishment of a finech repository by April 2024, encouraging fintech firms to voluntarily contribute relevant information. Additionally, the UPI limit for payments to hospitals and educational institutions saw a significant upward revision from Rs 1 lakh to Rs 5 lakh per transaction.