RBI's MPC meeting: Key insights,targets

MPC meeting

On April 4, 2024, in the Monetary Policy Committee meeting, the governor of RBI introduced and discussed the first monetary policy of the financial year 2024-25. The meeting addressed some critical decisions, key changes, regulations and economic growth in terms of inflation, liquidity, and financial stability.

Inflation target

In the monetary policy speech, the Governor of the RBI said that the dynamics for growth and inflation have played out favourably. Focusing on the central bank to bring inflation closer to its target of 4.0%

The repo rate is unchanged at 6.50%

MPC has decided to keep the repo rate unchanged at 6.50% and focus on the withdrawal of accommodation to align inflation with its target.

Projected inflation for FY24–25

With headline inflation in moderation and food price uncertainty persisting, the projected CPI inflation for FY24–25 is 4.5%.

GDP forecast for FY25 at 7%

Taking into account strong growth and lower inflation through different sectors (agriculture, manufacturing, and services), the Central Bank of India has projected the gross domestic product (GDP) growth for the current financial year (FY25) at 7%.

 Risks are evenly balanced

The risks of inflation are evenly balanced out, assuming a normal monsoon season. CPI inflation for 2024–25 is projected at 4.5%, with Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%,  Das said.

RBI commitment to simplify regulations and reduce compliance burdens

Key indicators of banks and non-banking financial companies (NBFCs) were stable, with good governance and regulatory compliance. Consequently, the RBI has committed to engaging with financial entities to simplify regulations and reduce compliance burdens.

market efficiency

The RBI announced various measures to enhance market efficiency, including launching a mobile app for the Retail Direct Scheme, facilitating the trade of sovereign green bonds, and reviewing the Liquidity Coverage Ratio framework.

Use of UPI for cash deposit facilities

To make the currency handling process at the bank more efficient, given the experience gained from card-less cash withdrawal using UPI at the ATMs. A proposal to facilitate the deposit of cash in CDMs using UPI has been made.

Liquidity and financial market conditions

The liquidity conditions improved due to government spending and RBI operations, with the weighted average call rate softening. To ensure market rates and financial stability, the RBI took into account flexible liquidity management.

Broader distribution of CBDC's

A proposal to allow non-bank payment system operators to offer Central Bank Digital Currency (CBDC) wallets to a wider population to test the resilience and stability of CBDC wallets and multichannels.