RBI MPC (Monetary Policy Committee) was held at 10 am on Friday morning.
The key highlights were given out by our Governor Shaktikanta Das which have been summarized as follows:
RBI keeps repo rate unchanged at 6.50%
The central bank had increased the repo rate by a total of 250 bps since May 2022. Due to the tenacity of inflation, the RBI has decided to keep repo rate at the same level.
Considering Global Economy
Governor Shaktikanta Das said that “We are witnessing unprecedented uncertainties in geopolitics and economy as the global economy is facing a renewed phase of turbulence”.
GDP Growth
The GDP has grown 7% in 2022-23 which indicates that the economic conditions were resilient.
India bond yields crash as RBI keeps rates unchanged
India government bond yields dropped after the Governor’s MPC, with the benchmark bond yield crashing to its lowest in the seven-month period after the RBI maintained status quo on policy rates. The 10-year benchmark bond yield have fallen to 7.1469%, which has been the lowest since 15th Sept. 2022, right after the policy decision. It was at 7.2857% prior to the decision.
GDP growth projection for FY24
RBI marginally raises GDP growth projection for FY24 to 6.5 per cent from earlier estimate of 6.4 per cent.
RBI keeps door open for more hikes
The central bank said its policy agenda remains focused on “withdrawal of accommodation”, signalling it might consider further rate hikes in the future. The pause in rate hikes is “for this meeting only”, said RBI Governor Shaktikanta Das.
No innovation has been brought by NUE applicants
Six New Umbrella Entity (NUE) hopefuls, which includes Facebook, Google and Amazon, have been unable to present an innovative solution due to which the aim to build an alternative to the NPCI has not gained momentum.
A total of six consortiums which had the global tech majors teaming up with local entities including Axis Bank and ICICI Bank had applied in 2021 for the NUE licence.
Deputy Governor T Rabi Sankar said that “Of the proposals that we have received, we did not quite see any innovative or infrastructural solution that had come up”.
AT1 bonds ecosystem remains quite robust
RBI Governor Shaktikanta Das has defended the debt instrument as a globally legitimate one AT1 (Additional Tier 1) bonds of YES bank despite the outcome of his decision remains pending before the apex court, to fully write off ₹8,300 crore of those bonds for rescuing the bank.
The Governor said that “The AT1 bonds ecosystem remains quite robust, quite stable. And it is a part of the Basel III regulations and we have adopted that in our country as well. And there is nothing more really I’d like to say on this”.
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