Inflation is top priority, loosening of rates is not on the table: RBI Governor Das

Mumbai: With the fundamentals of the Indian economy remaining strong and the recently announced Gross Domestic Product (GDP) rates indicating positive outlook, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday decided to keep the benchmark repo rate unchanged for the fifth time in a row at 6.50 per cent on Friday. Repo rate is the interest rate at which RBI lends short term money to commercial banks.

This was the last bi-monthly policy meeting of this calendar year. The six member rate-setting panel i.e MPC voted unanimously to keep the rates unchanged while five of the six members voted to remain focussed on the withdrawal of accommodation stance. Between May 2022 and February 2023, the MPC has increased the repo rate by 250 basis points from a historic low of 4 percent. Since its first credit policy meeting this calendar year, the MPC has held the benchmark repo rate at 6.5 per cent.

The RBI increased its gross domestic product (GDP) growth forecast by 50 basis points to 7 per cent while keeping its consumer price index (CPI) inflation forecast unchanged at 5.4 per cent for FY2023-2024.

“Inflation is top priority and loosening of rates is not on the table,” Shaktikanta Das, RBI governor told reporters at the policy ress conference.

With growth momentum sustaining, economists now expect the RBI to be on a long pause.

Das said that the near term inflation outlook is masked by risks to food inflation which might lead to an inflation uptick in November and December. “While monetary policy would look-through such one-off shocks, it has to stay alert to the risk of such shocks becoming generalised and derailing the ongoing disinflation process.”

“Based on the evolving situation, the MPC will take appropriate action to reach the 4 per cent target,” added Das.

A status quo in repo rate would provide slight relief for those paying home loan EMIs and also to real estate developers.

Anuj Puri, chairman ANAROCK Group said, “Given that housing prices have escalated across the top 7 cities in the last one year, atleast the unchanged home loan rates will give some relief to the home buyers. Going forward, we may expect the momentum in housing sales to continue in the wake of the unchanged repo rates coupled with the resultant stable home loan rates and positive economic outlook on India.”

The RBI also announced measures to increase regulatory oversight on growing credit segments. It said that it will come out with a unified regulatory framework for connected lending between its regulated entities. For digital lending, it proposed laying a regulatory framework for web-aggregation of loan products.