RBI Monetary 2024-25: Keeps Policy Repo Rate Unchanged at 6.5% for Seventh Consecutive Time
The Reserve Bank of India (RBI) announced on April 5 that it will maintain the policy repo rate at 6.5%, marking the seventh consecutive meeting without a change in rates. Governor Shaktikanta Das highlighted the decision following a two-day review meeting of the Monetary Policy Committee (MPC).
Key Points:
- The RBI retained its GDP growth forecast of 7% for the 2024-25 financial year, with growth projections of 7% for the June quarter and 6.9% for the September quarter. However, this projection is lower than the 7.6% expansion estimated for the previous fiscal year.
- Inflation, as measured by the Consumer Price Index (CPI), stood at 5.1% in February, down from its peak of 5.7% in December.
- The MPC projected CPI inflation for the FY25 at 4.5%, maintaining the figures from February.
- Governor Das emphasized that robust growth provides space for monetary policy to focus on bringing inflation down to its target of 4%.
The RBI also noted that while there are headwinds from geopolitical tensions and volatility in financial markets, fixed investment prospects remain bright, supported by various factors including government capital expenditure and an upturn in private capex.
In terms of external indicators, India's foreign exchange reserves reached an all-time high of $645.6 billion as of March 29, 2024, indicating improved resilience in the external sector.
Industry Expert’s opinion;
#1 Shrinivas Rao, FRICS, CEO, Vestian
"RBI has kept the repo rate unchanged at 6.5% for the 7th time in a row. This decision is in line with the current situation as inflation remains out of the target range of the RBI, due to soaring food prices in the past couple of months."
He further added, "Stable repo rates for more than a year has brought certainty into the real estate market. However, rate cuts are expected in the second half of 2024 if the inflation falls under the upper limit of 4%, set by RBI.”
#2 Mr. Vimal Nadar, Senior Director & Head, Research, Colliers India
"In a testament to stability, the Reserve Bank of India has maintained the repo rate at 6.5% for the 7th consecutive time in its first MPC meeting for FY2025. Against the backdrop of inflation cooling down in recent months and a projected GDP growth rate of 7% for FY2025, the decision to uphold benchmark lending rates reinforces investor confidence.
“For the real estate sector, the decision offers a sense of continuity and predictability. It also provides a solid foundation for future investment and development initiatives. Developers and investors can capitalize on the conducive environment to explore new opportunities and drive innovation in the market. Moreover, unchanged lending rates continue to present EMI dependent buyers a rational opportunity to fulfil their home-ownership aspirations. With anticipation of rate cuts in the ongoing fiscal year, the momentum in residential segment is likely to persist, ” he further exclaimed.
#3 Mr Ashwin Chadha, CEO, India Sotheby's International Realty
“Once again, the RBI has maintained its policy rates, aligning with expectations. However, the encouraging news is that inflation has decreased over the past couple of months, while growth prospects have improved. Economic growth has remained robust, evidenced by the above-expected GDP growth during Q3 FY’24. Recently, the World Bank also revised India's FY25 growth projection upwards to 6.6%, with FY24 GDP estimated at 7.5%.”
“This strong growth trajectory is expected to sustain adequate demand, particularly in the luxury segment of the real estate market. Stable rates are poised to support the housing market, and we anticipate a potential reduction in interest rates in the upcoming MPC meetings, “ he further added.
#4 Mr. Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd
“For the past couple of years, the RBI's policy has closely mirrored that of the Federal Reserve, and this trend persists. However, in the current Monetary Policy Committee (MPC) meeting, the governor highlighted how inflation is gradually decreasing and emphasized the robust growth in India’s economic landscape.”
“These domestic conditions of diminishing inflation and promising growth prospects set the stage for a potential rate cut. We anticipate that in the upcoming MPC meetings, the RBI will likely announce a rate cut ranging from 25 to 50 basis points, provided the current conditions continue to improve,” he added.
“Interestingly, the impact of rate increases has had minimal effect on the demand for home loans, which continues to rise. At Andromeda, we have observed approximately a 25% growth in the total disbursement of loans, including home loans, loans against property, and personal loans, during FY24,” he concluded.
#5 Mr. Ravi Ramesh Pilani, MD, Pilani Realty
"The stable repo rate indicates a similar outlook for home loan interest rates. This provides some certainty to home buyers in terms of what to expect when it comes to borrowing costs. This stability can be seen as positive for both new home buyers looking for loans and existing borrowers with floating rates, offering some relief in terms of financial planning. For borrowers with floating-rate loans, a stable repo rate reduces the risk of a sudden jump in their monthly EMIs due to rising interest rates. This allows for better budgeting and financial planning."
"A stable economic environment, often signaled by a steady repo rate, can boost consumer confidence. This might encourage people to spend more, potentially benefiting businesses and the overall economy," he further added.
#6 Mr. Pratapsingh Nathani, chairman and MD, Beacon Trusteeship
"On the momentous occasion of its 90th anniversary, the Reserve Bank of India (RBI) not only celebrates a legacy of facilitating India’s economic stability and development but also reasserts its dynamic and comprehensive approach as a central bank. Reflecting upon a history of adaptability and resilience, the RBI continues to solidify its role through the adept functioning of the Monetary Policy Committee (MPC). The MPC’s role has been pivotal in calibrating the policy repo rate which currently remains unchanged at 6.50%, a strategic decision aimed at balancing the imperatives of growth and inflation."
"Within the broader context of the global economy, the RBI remains cautiously optimistic, acknowledging external uncertainties yet remaining vigilant in its commitment to inflation forecasting. This careful monitoring is crucial to keeping inflation within the targeted bounds. Looking ahead, the RBI projects a promising GDP growth of 7.0% for the fiscal year 2024-25, buoyed by investment and consumption patterns that signal the ongoing vitality and potential of the Indian economy. This positive outlook underscores the RBI’s multifaceted strategies for fostering sustained economic stability and growth," he added.
Way Forward
The Reserve Bank of India's decision to maintain the policy repo rate at 6.5% for the seventh consecutive time reflects a strategic balance between promoting economic growth and managing inflationary pressures. With steady GDP growth projections and stable inflation expectations, the RBI's commitment to stability provides a foundation for confidence in the economy.
However, amidst external challenges such as geopolitical tensions and market volatility, vigilance remains essential. The insights from industry experts anticipate potential rate cuts in the future, signaling optimism for sustained economic momentum. As stakeholders navigate the evolving economic landscape, the RBI's proactive approach underscores its pivotal role in fostering stability and driving growth in the Indian economy.
