6th December 2024
The Reserve Bank of India (RBI) announced its fifth bi-monthly monetary policy for FY25 on December 6. The six-member Monetary Policy Committee (MPC), chaired by Governor Shaktikanta Das, voted 4-2 to keep the benchmark repro rate steady at 6.5% for the 11th consecutive meeting. The policy stance remains ‘Neutral,’ emphasizing a durable alignment of inflation with the target while supporting growth. Additionally, the MPC reduced the cash reserve ratio (CRR) by 50 basis points to 4%.
RBI Governor Shaktikanta Das highlighted that the central bank’s hawkish stance on inflation stems from persistently high food inflation, which remains unstable. However, the RBI remains optimistic about India’s growth prospects, bolstered by favorable monsoon seasons and an expected revival in capital expenditure.
Additional Measures:
ØFX-Retail platform to be linked with the Bharat Connect platform of NPCI
ØIntroduction of the Secured Overnight Rupee Rate (SORR) – a benchmark based on the Secured Money Markets
ØLimit for collateral-free agriculture loans to be raised to ₹2 lakh per borrower from ₹1.6 lakh
ØSmall Finance Banks permitted to extend pre-sanctioned credit lines through the UPI
ØSetting up of a Committee to recommend Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector
ØIntroduction of Podcast Facility as an Additional Medium of Communication
ØLaunch of MuleHunter.AI, an AI solution to identify Mule Bank Accounts
ØLaunch of ‘Connect 2 Regulate’ – An initiative for open regulation
Market Reaction:
Benchmark equity indices Sensex and Nifty dipped in mid-day trade after the Reserve Bank of India’s monetary policy announcement. The 30-share BSE benchmark Sensex declined 259.67 points to 81,506.19 soon after the announcement. The NSE Nifty also went lower by 87.9 points to 24,620.50.
The meeting holds significance as it represents the final policy review under Governor Shaktikanta Das before his tenure concludes on December 10, 2024, with no confirmation yet on a potential extension.