Ahead of RBI decision, here’s where repo rate, CRR, SLR, and MSLR stand

The Reserve Bank of India (RBI) will announce its bimonthly monetary policy review on Thursday, (April 6), at 10:30 am, for the first time in the current financial year. Economists expect that the RBI’s monetary policy committee (MPC) is likely to go for another 25 basis point (bps) rate hike this time.

Reserve Bank governor Shaktikanta Das-headed Monetary Policy Committee (MPC) during its three-day meeting (April 3, 5 and 6) will take into account various domestic and global factors before announcing the first bimonthly monetary policy for fiscal 2023–24. As a measure to tame worsening inflation, the central bank has raised the repo rates several times since May 2022.

"The need for another rate hike is driven by an elevated level of core inflation, which has remained near or above 6 per cent since mid-2021. The focus of the monetary policy will remain on breaking the persistence of core inflation and preventing generalisation of price pressures," added Gaura Sengupta, economist, IDFC First Bank.

Since May 2022, the RBI has increased the repo rate by 250 bps and with the recent rate hike by the Fed, it is expected that the Indian central bank will follow in its footsteps too.

Economists believe that increasing the repo rate is justified for the last time, and subsequently, there will be a pause until there is more clarity on the monsoon or kharif, as there is a potential upside to inflation in case of a failure.

"We do expect the RBI to increase the repo rate by 25 bps and probably change the stance to neutral. The reason is that the inflation data available to date for last two months is 6.5 per cent and 6.4 per cent, respectively. However, inflation will come down to less than 6 percent in the next two months based on present trends and the base effect. Given that the Fed and ECB have raised rates, there is an external factor to consider too in the context of maintaining forex stability," added Madan Sadnavis, chief economist, Bank of Baroda.

To ensure better liquidity in the system, the central bank introduced the standing deposit facility (SDF) in April 2022 as the basic tool to absorb excess liquidity under the new monetary policy. Since then, SDF has been used mostly as an alternative to reverse the repo rate.

Also Read: RBI MPC Meeting LIVE: is another repo rate hike coming? Shaktikanta Das to reveal MPC's rate decision at 10 am Thursday  

Also Read: An RBI repo rate hike or a pause on April 6? What economists expect from Shaktikanta Das-led MPC after its 2nd meeting of 2023