RBI Monetary Policy HIGHLIGHTS: Shaktikanta Das maintains status quo on interest rates, stance, says banks must communicate loan rate taking into account fees, charges
RBI Monetary Policy HIGHLIGHTS, RBI MPC Meet Feb 2024, Repo Rate: The Reserve Bank of India (RBI) Governor-led Monetary Policy Committee (MPC) kept the repo rate, or the key interest rate at which it lends short-term funds to commercial banks, unchanged at 6.5 per cent in its February 2024 review, in line with the expectations of most economists. RBI Governor Shaktikanta Das signalled that it may be a while before the central bank introduces interest rate cuts, after keeping them on hold for more than a year following six increases of a cumulative 250 basis points between May 2022 and February 2023, as it focuses on the "last mile of disinflation" towards its medium-term goal of 4.0 per cent and the economy stays resilient.
The MPC voted 5:1 to keep the repo rate on hold and also to keep the policy stance unchanged at "withdrawal of accommodation". A majority of interest rate-sensitive stocks, from spaces such as automobiles and real estate, took a beating, with the high-beta Nifty Bank index—whose 12 constituents include SBI, HDFC Bank and ICICI Bank—finishing the day 1.8 per cent weaker.
Monetary policy must continue to be actively disinflationary, the RBI chief said. Read the full text of the RBI chief's February 8 speech | Key things to know
Economists now see the central bank holding off on rate cuts at least till the second half of 2024.
Follow this space to catch all the highlights of the February 6-8 review of the RBI Governor-led MPC, including its projections on GDP growth and consumer inflation, expert views, market reaction, and much more:
RBI Monetary Policy HIGHLIGHTS, RBI MPC Meet Feb 2024, Repo Rate: The Reserve Bank of India (RBI) Governor-led Monetary Policy Committee (MPC) kept the repo rate, or the key interest rate at which it lends short-term funds to commercial banks, unchanged at 6.5 per cent in its February 2024 review, in line with the expectations of most economists. RBI Governor Shaktikanta Das signalled that it may be a while before the central bank introduces interest rate cuts, after keeping them on hold for more than a year following six increases of a cumulative 250 basis points between May 2022 and February 2023, as it focuses on the "last mile of disinflation" towards its medium-term goal of 4.0 per cent and the economy stays resilient.
The MPC voted 5:1 to keep the repo rate on hold and also to keep the policy stance unchanged at "withdrawal of accommodation". A majority of interest rate-sensitive stocks, from spaces such as automobiles and real estate, took a beating, with the high-beta Nifty Bank index—whose 12 constituents include SBI, HDFC Bank and ICICI Bank—finishing the day 1.8 per cent weaker.
Monetary policy must continue to be actively disinflationary, the RBI chief said. Read the full text of the RBI chief's February 8 speech | Key things to know
Economists now see the central bank holding off on rate cuts at least till the second half of 2024.
Follow this space to catch all the highlights of the February 6-8 review of the RBI Governor-led MPC, including its projections on GDP growth and consumer inflation, expert views, market reaction, and much more:
Latest Updates
RBI MPC Meet Feb 2024 LIVE Update: RBI February 2024 policy complementary, says Future Generali India Life Insurance CIO
“The MPC has delivered a ‘complementary policy’ in the backdrop of a prudent fiscal budget and largely comfortable global narrative. The policy verdict continues to demonstrate its key focal point being policy stability and achieving the inflation target on a durable basis," says Niraj Kumar, Chief Investment Officer at Future Generali India Life Insurance Company.
"The MPC remains sanguine on growth and hence continues to remain vigilant in achieving its inflation target. From the liquidity standpoint as well, the MPC reiterates its tight liquidity stance to ensure a better transmission of prior rate hikes. Overall, the MPC continues to reprioritise the inflation target head-on and distinctly indicates rate change in the near term is unlikely, given that growth is likely to remain resilient and inflation though benign, would still be above the target," Kumar adds.
RBI MPC Meet Feb 2024 LIVE Update: MPC tone balanced, says ITI MF's Vikrant Mehta
“Today’s MPC decisions on the policy rate and the stance were on expected lines and we found the tone of the MPC to be balanced. The post-policy statement and comments from the central bank indicate that a meaningful softening of policy stance and/or policy rate is perhaps a couple of meetings away, but we draw comfort from the commentaries related to liquidity viz. the RBI’s objective to keep the overnight rate around the repo rate and the central bank’s commitment to remain nimble and flexible on liquidity management," says Vikrant Mehta, Head-Fixed Income at ITI Mutual Fund.
"We remain overweight on duration, particularly the long end,” Mehta adds.
RBI MPC Meet Feb 2024 LIVE Update: RBI rate decision along expected lines, says LIC Housing Finance's Tribhuwan Adhikari
"The rate-hike cycle pause coupled with the projected GDP growth for FY25 gives an outlook of positivity," says Tribhuwan Adhikari, MD and CEO, LIC Housing Finance.
"The effects of the government-led infrastructure initiatives are visible nationwide and impacting housing demand positively, particularly in Tier II and Tier III cities. The Budget announcements on PMAY are going to give further impetus to the affordable housing segment. They will definitely aid the home loan business for lenders," Adhikari adds.
RBI MPC Meet Feb 2024 LIVE Update: What happens to home, auto loans as RBI keeps repo rate unchanged
How does the repo rate impact home and auto loans?
The repo rate is the rate of interest at which the RBI lends its money to commercial banks. So when the RBI increases the repo rate, commercial banks pay more interest on the money borrowed from the central bank. They recover that money by increasing the interest rates applicable to loans home, auto and other loans.
Consequently, the borrower has to bear a higher EMI burden.
Image: Reuters
RBI MPC Meet Feb 2024 LIVE Update: RBI mandates lenders to issue Key Fact Statement including all fees and charges
In order to ensure enhanced transparency for borrowers, the RBI mandates lenders to provide them with the Key Fact Statement (KFS), a document containing essential information such as the all-inclusive annual percentage rate (APR), and the recovery and grievance redress mechanism.
Currently, KFS is specifically mandated in respect of loans by scheduled commercial banks to individual borrowers, digital lending by regulated entities (REs), and microfinance loans.
Read more here: Banks must communicate loan rates taking into account fees, charges
RBI MPC Meet Feb 2024 LIVE Update: RBI may introduce rate cuts only after Fed, says Ladderup Wealth Management's Raghvendra Nath
"The outcome of the three-day Monetary Policy Committee meeting aligns with our expectations. The cumulative effect of policy repo rate increases is still working its way through the economy through a gradual decline in inflation numbers, but geopolitical events and their impact on supply chains and commodity prices are key sources of upside risks to inflation," says Raghvendra Nath, MD, Ladderup Wealth Management.
"Although no specific timeline has been indicated for reducing repo rates, it is anticipated that the Reserve Bank of India will initiate this process only after observing a similar move by the United States, aiming to mitigate the risk of capital outflows from India," Nath adds.
What experts make of Feb 8 RBI announcements
RBI MPC Meet Feb 2024 LIVE Update: Policy largely on expected lines, MPC prefers to remain cautious, says Union AMC's Parijat Agrawal
Parijat Agrawal, Head-Fixed Income at Union Asset Management Company, points out that the macroeconomic environment is turning favourable and the outlook for growth and inflation has improved.
"We expect the exceptional tightness in liquidity to ease and the yields to remain rangebound in the near term,” says Agrawal.
RBI MPC Meet Feb 2024 LIVE Update: Pause of repo rate to empower masses with strengthened purchasing power, says Ajmera Realty & Infra CFO
The RBI, cautious of the global headwinds, has defined a new risk brewing in the form of elevated debt levels in advanced economies, says Nitin Bavisi, CFO, Ajmera Realty and Infra.
"With the RBI highlighting residential housing as the growth propeller for construction activity, we foresee strong growth-led demand across real estate markets, especially within and around key cities undergoing major infrastructural transformations. The pause of the repo rate will empower the masses with strengthened purchasing power, thus providing momentum towards residential purchases and overall, contributing to the economic growth of the country," Bavisi adds.
RBI MPC Meet Feb 2024 LIVE Update: Interest rate environment stability to support housing market, says Knight Frank India's Shishir Baijal
“The central bank’s decision to maintain a pause in policy repo rate is in line with our expectation, and we consider this a comforting signal for the industry. Even though the inflationary pressures in most consumption categories have ebbed, food inflation continues to remain volatile. The RBI continues to remain watchful of inflationary expectations and the liquidity condition, which is currently in deficit, and it may continue to further tighten the liquidity condition to rein in inflation," says Shishir Baijal, Chairman and Managing Director. Knight Frank India.
"The fiscal consolidation plan outlined in the interim budget announcement, aiming to gradually reduce fiscal deficit to 4.5 per cent over the next two years, also provides a buffer against potential inflationary pressure. All these measures have the potential to bring down inflation to the RBI's target which will be comforting for the central bank to gradually pivot with a rate cut... We believe that lower home loan interest rates in the near future will serve as a big boost to homebuyer sentiment and enable better affordability, which is an extremely sensitive factor in this segment of the housing market," Baijal adds.
RBI MPC Meet Feb 2024 LIVE Update: Domestic financial system stays resilient with healthy balance sheets of banks, other financial institutions, says RBI Governor Shaktikanta Das
RBI Governor Shaktikanta Das points out that the financial parameters of NBFCs are also improving in tandem with those of the banking system.
"Good governance, robust risk management, sound compliance culture and protection of customers’ interest are of paramount importance for the safety and stability of the financial system and individual institutions," says the RBI chief.
The Reserve Bank lays great emphasis on these aspects, he adds. "We expect all regulated entities to accord the highest priority to these functions."
RBI MPC Meet Feb 2024 LIVE Update: What the RBI chief said on rupee, forex market
As of February 7, 2024, the rupee (INR) has remained stable against its peers in emerging market as well as a few advanced economies, the RBI chief points out.
Here are highlights of what he said on the forex market:
- The rupee exhibited the lowest volatility in 2023-24 (April-January) compared to the corresponding period in the past three years, in terms of coefficient of variation (CV)
- The exchange rate is market-determined; its relative stability in the recent period reflects strength and stability of the Indian economy, its sound macroeconomic fundamentals, financial stability, and improvements in the country's external position
- Rupee's relative stability in the recent period comes despite a stronger US dollar, elevated US Treasury yields
RBI MPC Meet Feb 2024 LIVE Update: What RBI chief said on inflation in February 8 speech
Here are some highlights of what the RBI chief said on inflation and consumer prices:
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Headline inflation rose to 5.7% in December after moderating to 4.9% in October
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That was primarily due to food inflation, mostly vegetables
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Core inflation (CPI inflation excluding food and fuel) remains strong across goods and services
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Uncertainties in food prices continue to impinge on the headline inflation trajectory
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MPC to carefully monitor any signs of generalisation of food price pressures which can fritter away gains in easing of core inflation
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Monetary policy must continue to be actively disinflationary to align inflation to 4% target on a durable basis
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MPC will remain resolute in this commitment
Headline inflation rose to 5.7% in December after moderating to 4.9% in October
That was primarily due to food inflation, mostly vegetables
Core inflation (CPI inflation excluding food and fuel) remains strong across goods and services
Uncertainties in food prices continue to impinge on the headline inflation trajectory
MPC to carefully monitor any signs of generalisation of food price pressures which can fritter away gains in easing of core inflation
Monetary policy must continue to be actively disinflationary to align inflation to 4% target on a durable basis
MPC will remain resolute in this commitment
Read full text of RBI Governor Shaktikanta Das's speech here
RBI MPC Meet Feb 2024 LIVE Update: RBI in no rush to cut rates, says Equirus economist
Anitha Rangan, economist at Equirus, says that while batting for India’s resilience amidst global volatility, it appears that the RBI is not in discussion for rate cuts as growth is very strong and does not require rate support, and inflation is subject to food price risks and is not at 4.0 per cent on a durable basis.
"Also, no giveaways on liquidity. In the quest to preserve the strength and bat for long-term growth, the RBI will rather look to maintain vigil and not in any rush to cut rates," Rangan adds.
RBI MPC Meet Feb 2024 LIVE Update: Shaktikanta Das says Indian economy has performed remarkably well in unsettled global environment
The RBI Governor says that growth in the domestic economy is accelerating and outpacing most forecasts while inflation is on a downward trajectory. Here are highlights of what he said:
- India’s potential growth propelled by structural drivers like
- improving physical infra
- development of world class digital and payments tech
- ease of doing business
- enhanced labour force participation
- improved quality of fiscal spending
"Our multipronged, proactive, and calibrated policies on the monetary, regulatory and supervisory fronts have worked well to maintain and strengthen macroeconomic and financial stability," says Das.