9th October, 2024
Summary: In its October meeting, the Reserve Bank of India’s (RBI) Monetary Policy Committee
(MPC), led by Governor Shaktikanta Das, decided to keep the key interest rates unchanged, with
the repo rate at 6.50%, Standing Deposit Facility (SDF) at 6.25%, and the Marginal Standing Facility
(MSF) at 6.75%. The MPC also shifted its policy stance from “withdrawal of accommodation” to
“neutral,” providing more flexibility to respond to evolving economic conditions. While the RBI
maintained its GDP growth forecast for FY25 at 7.2%, inflation remains a concern, with the central
bank highlighting rising food and fuel prices and the potential for inflation to increase in the short
term. Despite this, inflation is projected to moderate, with FY25 estimates held at 4.5%.
Key highlights from Governor Shaktikanta Das's speech"
• Monitoring Financial Health: The RBI is closely monitoring developments related to credit
cards, microfinance institution (MFI) loans, and unsecured loans.
• UPI Transaction Limits: The per transaction limit for UPI 123Pay will increase from ₹5,000
to ₹10,000, and the UPI Lite wallet limit will rise from ₹2,000 to ₹5,000.
• Attention to NBFCs: The RBI highlighted the growth of non-banking financial companies
(NBFCs) but raised concerns about some growing aggressively without strong underwriting
practices.
• FPI Flows: There has been a significant turnaround in foreign portfolio investment (FPI)
flows, moving from outflows of $4.2 billion to inflows of $19.2 billion between June and
October.
• FDI Strength: Foreign direct investment (FDI) flows remain strong, contributing positively
to India’s economic outlook.
• Forex Reserves: India’s foreign exchange reserves have surpassed $700 billion.
• Proactive Liquidity Management: The RBI will maintain a nimble and flexible approach to
liquidity management operations.
• Credit Market Transmission: The transmission to the credit market has been deemed Satisfactory
Market Reaction
In a volatile trading session on October 9, Indian benchmark indices were unable to
maintain their intraday gains and closed slightly lower amid last-minute selling. By the end
of the day, the Sensex had declined by 167.71 points, or 0.21%, to finish at 81,467.10, while
the Nifty dropped by 31.20 points, or 0.12%, to close at 24,982. During the session, the BSE
Sensex and Nifty 50 indices had previously reached highs of 852 points and 252 points,
respectively, before retracting