Mumbai, Dec 6: On Friday, the Reserve Bank of India (RBI) opted to maintain the policy rate for the 11th consecutive time, while significantly revising down its GDP growth forecast to 6.6 per cent for the current fiscal year, compared to its previous estimate of 7.2 per cent.
Despite the GDP growth for the July-September quarter falling to a seven-quarter low of 5.4 per cent, which was below its own projection of 7 per cent, the RBI chose to keep the interest rate steady.
The bank’s rate increase cycle was halted in April last year after six successive rate hikes totaling 250 basis points since May 2022.
During the announcement of its fifth bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das stated that the Monetary Policy Committee (MPC) has decided to maintain the repo rate at 6.5 per cent, keeping the policy stance neutral.
Das emphasized that the MPC will continue monitoring macroeconomic data for future adjustments.
The RBI downgraded the GDP growth estimate to 6.6 per cent from the previous 7.2 per cent and increased the inflation target to 4.8 per cent from the earlier projection of 4.5 per cent for this fiscal year.
To enhance liquidity for banks and stimulate economic activity, the RBI reduced the Cash Reserve Ratio (CRR) to 4 per cent from 4.5 per cent, releasing Rs 1.16 lakh crore to banks and bolstering their lending capacity.
The CRR represents the portion of a bank’s total deposits that must be kept in liquid cash with the RBI, and banks do not earn interest on this amount.
In October, the government reshaped the Reserve Bank’s rate-setting committee, the Monetary Policy Committee (MPC), marking the second meeting of the newly constituted panel, which includes three recently appointed external members: Ram Singh, Saugata Bhattacharya, and Nagesh Kumar. (Agencies)
