RBI Monetary Policy Committee Meet 2024: A Comprehensive Guide

• The RBI MPC meet was held on February 8, 2024. 
• Crucial decisions and suggestions regarding the Indian economy were made during the meeting. 

The Reserve Bank of India Monetary Policy Committee Meet was held on February 8, 2024, where market leaders discussed the future of the Indian economy. The RBI MPC has decided to keep the policy repo rate unchanged, which is at 6.5%. Interestingly, the six-member committee voted 5:1 to keep the repo rate unchanged while inflation continues to exceed the target of 4%. 

On February 8, 2024, RBI Governor Shaktikanta Das announced that the repo rate will remain steady at 6.5%, maintained since February 2023 to address global inflation concerns.

Critical Discussions at RBI MPC Meet 2024

RBI maintained a stable repo rate at 6.5% for the third consecutive quarter after six hikes in 2022. This approach signals the Reserve Bank of India’s cautious approach to balancing inflation management strategies while fostering economic growth. 

Thanks to multiple government strategies, inflation has cooled down from its peak in 2022. But it remains above the RBI’s target of 4%. Also, the projected Consumer Price Index (CPI) for the financial year 2024 is believed to be 5.4% and is expected to decline to 4.5% in the fiscal year 2025. 

The RBI governor mentioned that retail inflation decreased from a peak of 7.44% in July 2023 to 5.69% in December 2023, remaining above the RBI’s comfort zone of 4%-6%.

The monetary policy committee has also decided to remain focused on withdrawing accommodation. It also ensures that the inflation remains progressively aligned with the target while supporting growth. Shaktikanta Das says that the policy must continue to be actively disinflationary. 

The Reserve Bank of India has maintained the inflation projection at around 5.4% for 2023-2024. Furthermore, the CPI inflation is predicted to be at 4.5% for the fiscal year 2024-2025, which would be at 5% in Q1, 4% in Q2, 4.6% in Q3, and 4.7% in Q4. The GDP growth for 2024 is estimated at 7.3%, with projections of 7% for 2025. 

Related Read: DAVOS 2024:5 Key Discussions About The Future Of Global Finance

Critical Announcements at RBI MPC 2024

The Reserve Bank of India has mandated that market leaders provide borrowers with a Key Fact Statement (KFS). It would be a detailed document pointing out all-inclusive costs and charges; this could significantly enhance loan transparency. RBI is considering CBDC to enhance financial inclusion by bridging connectivity gaps.

Furthermore the following points were crucial in the RBI MPC meet 2024. 

• Review of ETPs: 
  • The RBI will ask for feedback on new rules for online trading platforms, where people can buy and sell things like stocks, bonds, or currencies.

• Hedging of gold price risk in IFSC: 
  • People in India can now protect themselves from changes in the price of gold by using a special market in the IFSC, where they can trade with foreign currencies and other countries’ laws.

• KFS for retail and MSME loans: 
  • All loans for small businesses and individuals will have to provide a clear statement with important information such as the total cost of the loan, the interest rate, and how to complain or get help if needed.

• Enhancing AePS: 
  • The RBI will make it easier and safer for people to use AePS, a system that allows them to pay with their Aadhaar number, which is a unique identity number given by the government.

• Principle-based framework for authentication: 
  • The RBI will set up some basic principles for verifying the identity of people who make digital payments, so that they can use different methods such as fingerprints, face recognition, or QR codes.

• Programmability and offline functionality in CBDC-R:
  • CBDC-R is a digital version of the Indian rupee, which the RBI is testing. It will have some new features, such as allowing people to make payments for specific purposes or in areas where there is no internet connection.

What does RBI MPC Meet 2024 mean for you?

In 2024, the RBI MPC meet had significant implications for borrowers, investors, and businesses nationwide. The unchanged loan interest rates and enhanced transparency through the Key Fact Statement (KFS) empower borrowers to make informed decisions. Increased borrowing would also bring the added liquidity back into the market. Additionally, 

Positive Implications of the Reserve Bank of India Monetary Policy Committee Meet 2024

The Reserve Bank of India’s decision to maintain the repo rate unchanged at 6.5% is expected to provide stability and predictability in the interest rate environment. This stability has the potential to support economic growth as it could provide businesses and consumers confidence about investing and spending in the country. 

The estimated Gross Domestic Product (GDP) growth of 7.3% in FY2024 indicates confidence in the Indian economy. This could be positive news in the markets of job creation and overall economic activity. Sadly, the inflation rate is still above the RBI’s target of 4% and is expected to moderate in FY2025. This would help maintain price stability and protect the value of savings. 

Data suggests the account deficit will decline in the second quarter of 2024. This is further expected to remain manageable in the future, stabilising the value of the Rupee to attract more foreign investments. Monetary Policy Committee Meet

Negative Implications of the Reserve Bank of India Monetary Policy Committee Meet 2024

Continuing the high-interest rates might dampen the credit growth and investment scenario. It is more concerning in the sectors sensitive to interest rates, like real estate and automobiles. This could significantly limit the pace of economic expansion. 

The Reserve Bank of India has acknowledged the uncertainty surrounding global geopolitical and economic scenarios. If the uncertainty continues, it could pose significant risks to India’s economic growth in future. Moreover, the RBI has continued its stance of withdrawal of accommodation, which might lead to tighter liquidity conditions in the banking system. This could further pose a challenge to the already harsh business credit scenario. 

The Reserve Bank of India’s Monetary Policy Committee meeting is believed to have mixed implications for the Indian economy. However, the decisions made in the meeting are expected to maintain the status quo stability and support growth. The concerns about the relatively high interest rates and global uncertainties are something to worry about. 

The short-term impact of the decision might be visible soon, but the long-term implications take more than the expected time to show results. Also, the expectation of stabilising the current account deficit amidst the global economic scenario is commendable. 

RBI might also continue to use variable rate reverse repos (VRRRs) to manage the liquidity in the system skillfully. The mandate for the banks to provide the KFSs to borrowers, detailing all the fees associated with the loan, should significantly improve transparency. 

Economic experts say the Reserve Bank of India Monetary Policy Committee meeting has adopted a cautious approach to balancing growth with inflation concerns. The implications would depend on factors ranging from national and global economic data. Readers are advised to stay updated with the current news for more information.