Repo Rate Kept Unchanged for 5th Time by RBI this Fiscal Year The previous change in the key rate took place in February 2023 when RBI hiked the repo rate by 25 basis points to 6.50 per cent from 6.25 per cent

The Reserve Bank of India on Friday kept the repo rate unchanged at 6.50 per cent. It remains unchanged for the 5th time this fiscal year. The previous change in the key rate took place in February 2023 when RBI hiked the repo rate by 25 basis points to 6.50 per cent from 6.25 per cent.

Repo rate refers to the rate at which banks deposit money with RBI.

The decision was made unanimously by the Monetary Policy Committee (MPC), comprising RBI Governor Shaktikanta Das, Rajiv Ranjan, Ashima Goyal, Shashanka Bhide, Jayanth Varma, and Michael Patra. The committee held meetings for three consecutive days- 6th, 7th and 8th of December 2023.

"(MPC) remain highly alert and prepared to undertake appropriate policy actions as warranted. Monetary Policy must continue to be actively disinflationary to ensure fuller transmission and anchoring of inflation expectation," said RBI Governor Shaktikanta Das during the presentation.

"The GDP growth for Q2 of the current FY has exceeded all forecasts. The fundamentals of the Indian economy remain strong with banks and corporate showing healthier balance sheets," he shared.

The real GDP growth for FY23-24 is projected at 7 per cent, with Q3 expected at 6.5 per cent and the Q4 at 6 per cent. The projections for first three quarters of FY25, are estimated at 6.7 percent, 6.5 percent, and 6.4 percent, respectively.

Other key announcements

Das proposed to enhance the UPI transaction limit from INR 1 lakh to INR 5 lakh for hospitals and educational insitutions. With regards to e-mandates, he proposed to enhance the limit for recurring transactions from INR 15,000 to INR 1 lakh for mutual fund subscriptions, insurance subscriptions, and credit card payments. To support the fintech industry and players of India, RBI also proposed to set up a fintech respository under Reserve Bank Innovation Hub.

Industry reacts

Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com and Makaan.com, says the unchanged repo rate will boost home purchases. "Stable interest rates are poised to boost home purchases and instill confidence in developers, enabling them to present more attractive offerings during the ongoing festive season, extending into the new year. This stability sets a positive tone for the real estate sector as we step into a new phase of growth in 2024."

Vimal Nadar, Senior Director- Research, Colliers India feels the move will give a push to real estate industry, "Steady interest rates will continue to fuel sentiment buoyancy in the market, keeping the housing market on a higher growth trajectory as we begin 2024."

"We anticipated that the housing sector, particularly the luxury segment, will continue to thrive amid a well-performing economy and growing purchasing power of the citizens of the country," shares Chadha, CEO, India Sotheby's International Realty.

Madan Sabnavis, Chief Economist, Bank of Baroda said that the policy does not have any surprise on the repo rate or stance. "However, there is a major revision in GDP forecasts for the year to 7% which is predicated by a good third and fourth quarter which go with revival in consumption demand. This is significant because we were getting contrary signals from the market on rural demand. The RBI's forecast of inflation for the quarters of next year are important as the number goes less than 5% only in Q2 which means that given the importance placed by MPC on inflation, it looks unlikely that there can be a rate cut before August of next year. Also the RBI is satisfied with the liquidity situation and has not announced any measures to augment the same. It is assumed that in the general course of activity this equilibrium will be achieved."

"The RBI policy today is very pragmatic & positive. RBI took comfort from lower core inflation & benign global conditions. We expect rate cuts probably to start in H2CY24 preceded by a change in forward guidance & stance on liquidity once RBI has greater comfort on dissipation of one-off food price shocks. With global & domestic policy rates peaking & inflation momentum slowing down, the environment for fixed income is constructive with opportunity to participate in capital gains as the rate cycle turns," shares Anurag Mittal, Head of Fixed Income, UTI AMC.

On fintech repository, Anand Agrawal, Co-Founder and CPTO, Credgenics, said, "RBI's proposal to create a fintech repository is a very positive move for the industry. It will further catalyse innovation by fostering transparency and improved collaboration among fintechs, other financial services industry players, and regulators. The approach to encouraging voluntary contributions from fintechs will empower regulators with real-time insights and enable informed, agile, and risk-mitigating decision-making. This initiative is a crucial step in the RBI's approach to streamlining the regulatory framework for fintechs. It will boost market confidence while ensuring a dynamic and well-regulated environment for the continuous evolution of the Indian fintech industry."

"A Fintech 'Yellow pages' can be a game changer for emerging fintechs to put themselves out there and increase their discoverability & visibility within the ecosystem and with the regulator. Such a repository will also help in designing policy approaches that will help a larger cross section of the ecosystem and impact more customers positively," said Yashwant Lodha, Co-founder, PayNearby.