The Reserve Bank of India (RBI) opted to keep its key interest rates steady for the eleventh consecutive session, while simultaneously reducing the cash reserve ratio (CRR) by 50 basis points, an action aimed at enhancing liquidity in the financial system.
Concluding its three-day monetary policy meeting, Governor Shaktikanta Das announced that the committee reached a 4-2 decision to maintain the policy repo rate at 6.50 percent, a level that has remained unchanged since February 2023.
Additionally, the RBI decreased the CRR for all banks by 50 basis points, bringing it down to 4.0 percent, marking the first reduction since March 2020. This measure is expected to inject INR 1.16 trillion into the banking system, as the CRR represents the percentage of deposits that banks are required to keep aside as cash.
The Monetary Policy Committee (MPC) also resolved to uphold a neutral monetary policy stance, with a clear focus on consistently aligning inflation with set targets while fostering economic growth.
The central bank has revised its real GDP growth forecast for the 2024-25 fiscal year down to 6.6 percent from the previous estimate of 7.2 percent.
Decision-makers noted a surge in headline inflation, which climbed above the upper tolerance level to 6.2 percent in October. For the 2024-25 period, inflation is anticipated to be 4.8 percent, an adjustment from the earlier projection of 4.5 percent.
