On June 7, 2024, Friday, Reserve Bank of India (RBI) announced its second bi-monthly monetary policy for FY 2024-25. As estimated by bankers, the Repo Rate remains unchanged at 6.5% for the 8th consecutive time. This decision was made by a six-member Monetary Policy Committee (MPC), which was led by the RBI Governor Shaktikanta Das. The decision was supported by the MPC with a majority vote of 4:2.
RBI’s Policy Stance
MPC decided to stand on its stance on ‘withdrawal of accommodation’. This means that the central bank aims to gradually reduce the support provided to the economy during the COVID-19 pandemic. This will help them control inflation in the country and stabilize growth. RBI’s cautious approach is shown by their decision to keep the repo rate unchanged amid ongoing economic uncertainties.
Revised GDP Growth Forecast
RBI has revised its GDP growth forecast for FY 2024-25 from 7% to 7.2%. RBI also expects a speedy growth with quarterly forecasts showing improvement:
- Q1 (FY25) GDP growth forecast increased from 7.1% to 7.3%
- Q2 (FY25) GDP growth forecast increased from 6.9% to 7.2%
- Q3 (FY25) GDP growth forecast increased from 7% to 7.3%
- Q4 (FY25) GDP growth forecast increased from 7% to 7.2%
Inflation Forecasts Remain Stable
RBI has retained its Consumer Price Index (CPI) inflation forecast for FY25 at 4.5%. The quarterly inflation estimates are:
- Q1 FY25 at 4.9%
- Q2 FY25 at 3.8%
- Q3 FY25 at 4.6%
- Q4 FY25 at 4.5%
Also Read: 5 Equity Shares for 1, Stock Split and Dividend: Premier Quarter for Premier Explosives
Financial Sector Resilience
RBI Governor Shaktikanta Das has highlighted the resilience of India’s financial sector in his speech. The banking system remains strong and with premium asset quality and rising profitability. Non-Banking Financial Companies (NBFCs) have also shown solid financial performance in FY24. The financial sector as a whole, including banks and NBFCs, continues to exhibit strength and stability.
Dividend Transfer to Government
RBI has transferred INR 2.11 lakh crore to the union government as a dividend. This transfer of dividend is a part of the central bank’s efforts to support the government’s fiscal operations. RBI also decided to keep a contingent reserve buffer of 6.5% to strengthen its balance sheet.
Measures to Moderate Unsecured Loans
RBI has expressed concerns over the rising trend of unsecured loans. Governor Shaktikanta Das has announced that the central bank would take additional steps to moderate and manage these loans. He ensured that regulated entities follow proper disclosure practices regarding the fees charged.
RBI’s Digital Payments Initiative
RBI shared plans for a Digital Payments Intelligence Platform. This will aim at combating the surge in digital payment frauds. They will focus on advanced technologies like AI and ML. RBI also announced the inclusion of recurring payments for Fastag, National Common Mobility Card (NCMC), etc., with an auto-replenishment facility under the e-mandate framework. Auto-replenishment of UPI Lite wallet will also be introduced as well.
Also Read | Sensex Surges 700 Points, Nifty Reaches 22,820
Promoting Innovation
RBI is encouraging innovation in the financial sector with the launch of the third edition of RBI Hackathon HARBINGER 2024 – “Innovation for Transformation”. It aims to bring together all the creative minds to develop solutions for evolving needs of the digital economy.
Economic Outlook
India’s economic activity remains strong towards facilitating growth. India’s GDP is growing by 8.2% in FY24, driven by strong manufacturing sector performance. Current FY remains strong, supported by different economic indicators and favourable market conditions.
About Author
This article has been written by Mr Radhesh Tarang Shah, who is a third-year management student at Institute of Management, Nirma University. He has a passion for writing articles and poems. He has experience as a financial analyst, author, news writer, marketer and social worker.
