Post Monetary Policy briefing LIVE: Nearly half of withdrawn ₹2,000 banknotes returned, says Das

1. MPC, decides to keep repo rate unchanged at 6.5%. To remain focussed on withdrawal of accommodation of policy stance.

2. Retail inflation projection lowered to 5.1% from an earlier estimate of 5.2%. Headline inflation is still above the 4% target and is likely to remain so during the rest of the year.

3. Net inflow in non-resident deposits at USD 8 billion in FY’23, was USD 3.2 billion last year

4. Real GDP growth projection for FY23/24 is 6.5%.

RBI not thinking of withdrawing ₹500 notes, or re-introducing notes in ₹1,000 denomination; request public not to speculate: RBI Guv

₹1.80 lakh cr of ₹2,000 notes, representing nearly half of the outstanding notes in the withdrawn denomination, have returned back: RBI Guv

“As of March 31, 2023, 3.62 lk cr notes were in circulation. So fat, 1.8 lk cr ₹2000 notes have come back post announcement,” said RBI Guv in post monetary policy press conference. “This is on the expected lines. There hasn’t been any rush in banks either.”

Ranen Banerjee, Partner, Economic Advisory Services, PwC India

The MPC expectedly continued with the rate pause as the inflation prints have come well within the tolerance band of 2 to 6% and growth concerns persist. The stance has been kept as withdrawal of accommodation as that is the signalling the RBI wants for keeping the inflationary expectations anchored. The FY24 growth rate projection of 6.5% is more on the optimistic spectrum band as the number of downside risks listed are quite a many. The projected growth rate for Q1 at 8% in FY24 is likely to get tested despite the holding up of demand in the first two months of the year.

“It has now been decided to permit the issuance of RuPay Prepaid Forex cards by banks. This will expand the payment options for Indians travelling abroad. Further, RuPay cards will be enabled for issuance in foreign jurisdictions,” governor Shaktikanta Das said.

RBI MPC meet | Top 5 points

1. Monetary Policy Committee, or MPC, decides unanimously to keep repo rate unchanged at 6.5%. MPC to remain focussed on withdrawal of accommodation of policy stance.

2. Retail inflation projection lowered to 5.1% from earlier estimate of 5.2%. Headline inflation is still above 4% target and is likely to remain so during rest of the year.

3. Domestic demand condition remains supportive of growth.

4. Real GDP growth projection for FY23/24 is 6.5%.

Quarterly projection is as follows – Q1 is 8%, Q2 is 6.5%, Q3 is 6% and Q4 is 5.7%.

5. Net inflow in non-resident deposits at USD 8 billion in FY’23, was USD 3.2 billion last year.  You must see our detailed report

Sakshi Gupta, principal economist, HDFC Bank, Gurugram

“The central bank could keep rates unchanged through the year with the chance of any rate cuts in FY24 seeming slim for now.”

“We expect both growth and inflation to be lower than the RBI’s estimates — growth at 6% and inflation to average at 4.8%-5% in FY24.”

“The policy decision does little to move the needle in the bond market as it was broadly in line with expectations.”

Sujan Hajra, chief economist and executive director, Anand Rathi shares and stock brokers, Mumbai

“In the wake of a greater-than-anticipated decline in inflation in the recent past, it was anticipated that the monetary policy would shift from a liquidity withdrawal to a neutral stance. However, the MPC has decided to maintain the current stance by a majority vote. This is due to the fact that the demonetisation of Rs. 2,000 banknotes has significantly contributed to the recent increase in liquidity.”

“RBI’s projections indicate that its inflation target of 4% will be exceeded each month of the current fiscal year. While the continuation of the RBI’s policy stance is somewhat disappointing, the central bank’s cautious approach in light of upside risks, such as the potential impact of El Nino on India’s monsoon and the continuation of monetary tightening by the world’s major central banks, appears justified and well-articulated.”

“Therefore, we anticipate that the monetary policy announcement will have no effect on the financial markets.”

V K Vijayakumar, chief investment strategist, Geojit financial services ltd, Kerala

“Even though the MPC’s rate decision and stance have come on expected lines as pause and withdrawal of accommodation respectively, the Governor’s commentary can be interpreted as positive.”

“The central bank’s projection of FY24 CPI inflation has come at 5.1%, lower than 5.2% projected in the previous meeting. This indicates that the MPC has come to the end of this rate hiking cycle.”

“If the monsoon is normal and the global scenario is favourable, the MPC may think about a rate cut by end CY2023 or early 2024. From the stock market perspective, this is positive.”

E-rupee is, in fact, a currency in digital form, whereas UPI is a platform that facilitates banking transactions. The CBDC will not have an intermediate. You should read in detail

Governor Shaktikanta Das said that RBI’s MPC has advocated expanding the scope and reach of e-rupee vouchers to PPIs, as well as authorising the issue of e-rupee vouchers on behalf of individuals.

According to him, this would increase the prevalence of digital payments in the country.

MPC keeps repo rate unchanged at 6.5%; FY24 GDP growth forecast retained at 6.5%

The rupee hardly moved as the Reserve Bank of India maintained its monetary stance and held the benchmark policy rate at 6.5%, as predicted. The rupee was trading at 82.5850 to the dollar, up from 82.5950 previous to the policy announcement.

Steady as it goes: RBI presses pause on repo rate hike, keeps it at 6.5% Read our full report

Repo rate, inflation and GDP: What did RBI’s Monetary Policy Committee say today Read here

Sensex gained 144 points to trade at 63,287; Nifty in green at 18,770

MPC decides to keep repo rate unchanged at 6.5%, Standing Deposit Facility Rate remains at 6.25%. Marginal Standing Facility Rate and Bank Rate unchanged at 6.75%: Governor Shaktikanta Das

Going forward, RBI will remain nimble in its liquidity management while ensuring ample availability to meet production needs of the economy: Das

Forex reserves are at comfortable levels, says RBI Governor adding that stood at at $595.1 billion as on June 2.

Goal is to reach the targeted 4% inflation going forward, our monetary policy actions are yielding desired results giving us space to keep rates unchanged in this meeting: Das

FY24 5.1% (Projection) 5.2% (Earlier)

Q1FY24 4.6% (Projection) 5.1% (Earlier)

Q2FY24 5.2% (Projection) 5.4% (Earlier)

Q3FY24 5.4% (Projection) 5.4% (Earlier)

Q4FY24 5.2% (Projection) 5.2% (Earlier)

Average system liquidity is in surplus mode and could increase as ₹2k notes get deposited in banks: Das   

ALSO READ: About 80% choose to deposit Rs2000 notes instead of exchanging: Report

RBI growth outlook

FY24       6.5% (Projection)      6.5% (Earlier)

Q1FY24  8% (Projection)       7.8% (Earlier)

Q2FY24  6.5% (Projection)     6.2% (Earlier)

Q3FY24  6%   (Projection)     6.1% (Earlier)

Q4FY24  5.7% (Projection)     5.9% (Earlier)

Headline inflation is above the target of 4 per cent and expected to remain so during rest of the year: RBI Governor

We can derive satisfaction from the fact that Indian economy and fin sector stand out as resilient, says RBI governor Das

MPC also decided by a majority of five out of 6 members to remain focused on withdrawal of accomodation, says Das.

Inflation on downward trajectory, but still high and above the target, says Guv Das

A decrease in the repo rate means that RBI has decided to lower the cost of borrowing for commercial banks. 

When the repo rate is decreased, it becomes cheaper for banks to borrow money from RBI. This reduction in borrowing costs can be passed on to customers, making loans and credit more affordable for individuals and businesses. 

The purpose of decreasing the repo rate is typically to stimulate economic activity by encouraging borrowing, investment, and consumption. 

An increase in the repo rate means that RBI has decided to raise the cost of borrowing for commercial banks.

This rate is the interest rate at which banks can borrow funds from it.

When the repo rate is increased, it becomes more expensive for banks to borrow money from the central bank. As a result, banks may pass on this increased cost to their customers, making loans and credit more expensive for individuals and businesses.

The aim of increasing the repo rate is typically to control inflation and reduce excessive borrowing in the economy.

We expect the RBI to keep the repo rate on hold at 6.5% at its June 8 meeting, but make a dovish pivot by switching its stance to neutral from accommodation withdrawal. That would be a response to unexpectedly sharp disinflation in March and April.

— Abhishek Gupta, India economist at Bloomberg Economics

“While the monetary policy committee might vote unanimously to keep rates unchanged, the decision to extend the stance could see a split as the doves would prefer to close the door on further tightening as inflation beats a retreat,” said Radhika Rao, economist at DBS Bank in a note dated June 5.

“Amid steady growth and falling inflation, RBI can opt to watch global events unfold from the sidelines, especially given India’s improved macro stability,” said Rahul Bajoria, economist at Barclays Plc. “That should enable the full transmission of earlier policy rate hikes without necessarily being very disruptive.”

Sensex opens in green above 63,100, and Nifty around 18,700 before the key rates announcement.

All 40 economists in a Bloomberg survey forecast RBI will keep the repurchase rate unchanged at 6.50% on Thursday, signalling that inflation could cool further in the months ahead. Consumer price growth slowed to 18-month low of 4.7%, edging toward the midpoint of the RBI’s 2%-6% target range.

The RBI MPC (Reserve Bank of India’s Monetary Policy Committee) meeting is important because it:

1. Determines key interest rates and influences borrowing costs and liquidity.

2. Aims to manage inflation within a target range for economic stability.

3. Adjusts interest rates to stimulate investment or curb excessive borrowing.

4. Decisions impact investments, currency rates, and stock markets.

5. Communicates policy decisions and rationale to build trust and confidence.

1. Shaktikanta Das, Governor of the Reserve Bank of India and ex-officio Chairperson

2. Michael Debrata Patra is the Bank’s Deputy Governor in charge of monetary policy.

3. Rajiv Ranjan is the Bank’s Executive Director in charge of Monetary Policy.

4. Ashima Goyal is a visiting fellow at Yale University and a professor at the Indira Gandhi Institute of Development Research in Mumbai.

5. Shashanka Bhide is a senior advisor of the National Council for Applied Economic Research, a think tank situated in New Delhi

6. Jayanth Varma is an accounting and finance professor at the Indian Institute of Management in Ahmedabad.

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC)is holding its second bi-monthly monetary policy meeting for FY24 beginning on Tuesday, its outcome will be announced today.

RBI governor Shaktikanta Das will announce the key monetary rate – the repo rate- at a media briefing at 10am.

Economists believe that MPC will start cutting the policy rate sometime in the second half of the fiscal year. Given a wider unanimity on the fact that the current rate hike cycle is over and it is only a matter of time before a rate cut begins, the big question on monetary policy stance is not as important as it was a few months ago. Read more here

The rupee is expected to begin trading lower on Thursday due to the decline in Asian currencies, led by the Chinese yuan. Market sentiment is also influenced by anticipation of the Reserve Bank of India’s upcoming decision on interest rates, reported news agency Reuters.

The RBI governor Shaktikanta Das has indicated that the consumer price-based (CPI) inflation, which reached an 18-month low of 4.7 per cent in April, is expected to lower further. The CPI for May will be disclosed Monday.

Before, April when the RBI paused its rate hike cycle and maintain the repo rate at 6.5 per cent, it had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to contain inflation.

The Reserve Bank of India (RBI) will maintain the policy repo rate at 6.5 per cent during its upcoming announcement on Thursday.