Banks stocks climbs after RBI keeps key rates unchanged

The Reserve Bank of India (RBI) monetary policy committee (MPC) has voted to keep the repo rate unchanged at 6.5%.

After assessing the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (9 October 2024) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%.

Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%.

The MPC also decided to change the monetary policy stance to 'neutral' and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

The projected real GDP growth for 2024-25 is maintained at 7.2%. The quarterly breakdown is as follows: Q2 at 7.0%; Q3 at 7.4%; and Q4 at 7.4%. Real GDP growth for Q1:2025-26 is projected at 7.3%. The risks are evenly balanced.

The projected CPI inflation for 2024-25 remains unchanged at 4.5%. The quarterly breakdown is as follows: Q2 at 4.1%; Q3 at 4.8%; and Q4 at 4.2%. CPI inflation for Q1:2025-26 is projected at 4.3%. The risks are evenly balanced.

During the policy meeting held on October 7 to 9, 2024, Saugata Bhattacharya, Professor Ram Singh, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50%. Dr. Nagesh Kumar voted to reduce the policy repo rate by 25 basis points.

Dr. Nagesh Kumar, Saugata Bhattacharya, Professor Ram Singh, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shaktikanta Das voted for a change in stance from withdrawal of accommodation to neutral and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.

The minutes of the MPCs meeting will be published on October 23, 2024. The next meeting of the MPC is scheduled during December 4 to 6, 2024.

Following the RBI announcement, the Nifty Bank index was up 0.92% to 51,490.50 while the benchmark Nifty 50 index was up 0.82% to 25,218.60.

SBI (up 2.52%), PNB (up 2.41%), Axis Bank (up 2.23%) and ICICI Bank (up 1.8%) surged.

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