Here are RBI’s most important announcements:

• The Monetary Policy Committee (MPC) votes unanimously to maintain the reserve rate at 6.5%. The MPC will remain focused on the withdrawal of policy accommodation.
• The retail inflation forecast decreased to 5.1% from 5.2% previously. It is probable that headline inflation will remain above the 4% target for the remainder of the year.
• Domestic demand conditions continue to be conducive to expansion.
• The projected real GDP growth for FY23/24 is 6.5%.
• The projections for each quarter are as follows: Q1 is 8%, Q2 is 6.5%, Q3 is 6%, and Q4 is 5.7%.
• The net inflow of non-resident deposits increased from USD 3.2 billion in FY’22 to USD 8 billion in FY’23.
• Since this year’s January, the Indian rupee has remained stable.
• The current account deficit is anticipated to moderate further in the fourth quarter and remain manageable. Forex reserves are at acceptable levels.
• Due to geopolitical circumstances, global economic activity will decelerate.
• MPC will continue to take prompt and appropriate policy actions to securely anchor inflation expectations.

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The RBI has also projected a GDP growth rate of 6.4% for the upcoming fiscal year. The MPC predicts that retail inflation will reach 5.3% in 2019-20.

Was the rate increase decision unanimous?

With MPC members Ashima Goyal and Jayanth R. Varma voting against the increase, the RBI’s policy panel voted by a majority of 4 to 2 to raise the Repo rate, the sixth time since May 2022.

The Monetary Policy Committee (MPC) reaffirmed, by a majority vote of 4 to 2, its position on the withdrawal of monetary accommodation to ensure that inflation remains within the target range in the future, while supporting economic growth. Goyal and Varma also voted against the accommodation withdrawal.

What will be the consequences?

Bank lending rates are anticipated to increase as the cost of money continues to climb. Auto, mortgage, and personal loan monthly payments will also increase. As these loans are linked to the Repo rate, the external benchmark linked lending rate (EBLR) of banks will increase by 25 basis points (bps). A basis point is equal to one-hundredth of a percentage point. Approximately 43.6% of all loans are now linked to the Repo rate.

The marginal cost of funds-based lending rates (MCLR), which comprise 49.2 percent of banks’ loan portfolios, are also anticipated to increase. The increase will help to moderate the country’s inflation.

The hike till now

Since May of this year, the RBI has lifted the repo rate by a total of 250 basis points to 6.50 percent.

In an effort to curb retail inflation, the MPC increased the Repo rate by 35 basis points in December 2022. The MPC increased the repo rate by 40 basis points in May and by 50 basis points at each of its next three meetings.A basis point is equivalent to one-hundredth of a percentage point.

Growth projection

The RBI has projected a GDP growth rate of 6.4% for the following fiscal year (FY2024). In the December policy review, the MPC reduced its GDP forecast for fiscal 2023 from 7% to 6.8% due to persistent geopolitical tensions, a global economic slowdown, and tighter global financial conditions.

Response of the market

At 10:55 IST, the benchmark Sensex was trading 261 points, or 0.43 percent, higher at 60,547.32 while the NSE Nifty was trading 96 points higher at 17,817.

“The market is aware of this (increase) and it is unlikely to have a significant influence on the market. According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the most influential global market factors are the evolution of the US economy and the Fed’s monetary policy.

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Tuesday’s statements by Federal Reserve chairman Jerome Powell were favourably received by the market. His remark that “the disinflationary process would take some time” is interpreted as confirmation of the ongoing disinflationary process.
“Also, the fact that the disinflationary process is proceeding even when the economy is creating a record number of jobs is considered as beneficial. “The unabated FII selling — Rs 7,774 crore in the last three sessions – is currently the market’s largest drag,” he said.

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In December 2022, following the year’s final MPC meeting, the RBI increased the repo rate by 0.35 percentage points to its current level of 6.25 percent. This fifth consecutive increase in interest rates brought the repo rate to its highest level since March 2019. In contrast, the reverse repo rate remained unchanged at 3.5%.

The RBI governor begins his speech by announcing the first Monetary Policy statement of 2023.

Repo rate increased in prior meeting.

At its previous meeting in December 2022, the MPC increased the repo rate by 0.35 percentage points but left the reverse repo rate unchanged. Read

The Real GDP growth for 2023-24 is projected at 6.4% with Q1 at 7.8%, Q2 at 6.2%, Q3 at 6% & Q4 at 5.8% :RBI Governor Shaktikanta Das pic.twitter.com/xDu5YgiDMv

— ANI (@ANI) February 8, 2023

What are monetary policy, the reverse repo rate, and the repo rate?

Here is all the information you need concerning monetary policy, repo rate, and reverse repo rate.

This is the interest rate charged by the RBI when commercial banks sell their securities to the central bank in order to borrow money. Essentially, it is the interest charged by the Reserve Bank of India (RBI) when banks borrow from it, similar to how commercial banks charge interest on auto loans and home loans. Current repo rate is 6.25 percent.

The Reserve Bank of India’s Monetary Policy Committee meeting, which began on Monday, will announce its decision on Wednesday, amid predictions that the repo rate will increase by 25 basis points (bps).

What is financial policy?

The monetary policy of the Reserve Bank of India is a collection of financial instruments and measures designed to safeguard and promote economic growth. The RBI conducts monetary policy with the “primary goal of maintaining price stability while keeping in mind the objective of growth,” as stated on its website.

Monetary policy reviews are one of the central bank’s most effective tools for achieving financial stability and economic growth. Monetary policies govern the overall money supply available to commercial banks and, indirectly, to individuals and businesses.

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What exactly is the repo rate?

This is the interest rate charged by the RBI when commercial banks sell their securities to the central bank in order to borrow money. Essentially, it is the interest charged by the Reserve Bank of India (RBI) when banks borrow from it, similar to how commercial banks charge interest on auto loans and home loans. Current repo rate is 6.25 percent.

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