RBI Policy: The Reserve Bank of India’s Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, opted for a status quo in its monetary policy. The panel, through a 5:1 vote, favored keeping the repo rate unchanged at 6.5 percent.
This was for the sixth straight time that the central bank maintained status quo in the benchmark rate.
While the central bank decided to keep the repo rate unchanged, it was not unanimous among all six members of the MPC, indicating that the rate-setting panel might opt for a rate cut in the second half of FY25.
If that starts to happen in the H2 of the next fiscal year, it will bring much-needed relief for home loan borrowers. They have long been waiting for a rate cut after witnessing their housing loan interest rates increase by up to 2.75 percent (rate hike varies from bank to bank) in a span of 12 months during FY23.
The RBI’s monetary policy unfolded as anticipated, with no changes in rates and a maintained stance of ‘withdrawal of accommodation’.
“Let me reiterate that our policy stance of withdrawal of accommodation should be seen in the context of incomplete rate transmission and inflation remaining above the 4 percent target,” the RBI Governor said.
The RBI has chosen to engage in two-way market interventions through repo and reverse repo. The central bank assures its commitment to agility and prompt responses to evolving conditions. It underscores that the stance on withdrawing accommodation should be considered in light of incomplete transmission and inflationary concerns.
Banks and NBFCs asked to be more transparent in loan matters
In a major move that will benefit loan borrowers, the Reserve Bank has asked banks and non-bank lenders to be more transparent with customers as far as various charges, including processing fee, are concerned.
Talking about this move, the RBI Governor said, “At present, the loans and advances availed by borrowers, apart from including the rate of interest, also include other fees and charges such as processing fees, documentation charges, etc. To enhance transparency in disclosure of such information, the Reserve Bank had mandated certain categories of lenders to provide the borrower a Key Fact Statement (KFS) containing essential information such as the all-inclusive annual percentage rate (APR) and and recovery and grievance redress mechanism. The requirement of KFS is now being extended to cover all retail and MSME loans. This measure will lead to enhanced transparency in lending and enable customers in making informed decisions.”
Das on economic outlook
Talking about India’s economic growth outlook, the Governor said that in this unsettled global environment, the Indian economy has performed remarkably well in the recent years. Growth is accelerating and outpacing most forecasts, while inflation is on a downward trajectory, he added.
“At the current juncture, India’s potential growth is propelled by structural drivers like improving physical infrastructure; development of world class digital and payments technology; ease of doing business; enhanced labour force participation; and improved quality of fiscal spending. Our multi-pronged, proactive, and calibrated policies on the monetary, regulatory and supervisory fronts have worked well to maintain and strengthen macroeconomic and financial stability,” he said.
