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PremiumRBI Monetary Policy Meeting Highlights: The Reserve Bank of India’s (RBI) announced its fifth bi-monthly monetary policy of FY25, today, December 6. The six-member Monetary Policy Committee (MPC) led by RBI Governor Shaktikanta Das decided by a 4 to 2 majority to keep the benchmark repo rate unchanged at 6.5% for the eleventh straight meeting, and maintain the monetary policy stance ‘Neutral’ and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth. Moreover, the rate setting panel slashed the cash reserve ratio (CRR) by 50 basis points (bps) to 4%. Stay tuned to our RBI Monetary Policy Meeting Live blog for the latest updates.
RBI MPC Highlights: Here are the key takeaways of the December RBI Policy today:
1] Policy Measures:
2] GDP Growth Estimates:
FY25 GDP growth estimates cut to 6.6% from 7.2% earlier. Quarterly GDP growth estimates are -
3] CPI Inflation Forecast
FY25 CPI inflation target raised to 4.8% from 4.5%. Quarterly inflation forecast are -
4] Additional Measures
RBI MPC Live Updates: “RBI has prudently taken into account the rising input cost to raise the limit for collateral free agri loans to ₹2 lakh from ₹1.6 lakh earlier. This will be a boon for small farmers and equip them to better adapt to the challenges of rising cost of farming activities. That said, collateral free loans come with their own set of risks. Lenders should build robust risk management strategies to cope with fresh developments. While onboarding borrowers, it is vital for lenders to vet any properties they own, and their income, which will help establish repayment ability of borrowers. They also should use the latest technology to enhance the real-time monitoring efforts to keep risks in check," said Vishal Sharma, Cofounder & CEO of AdvaRisk, an ICICI and NABARD-backed Fintech startup.
RBI MPC Live Updates: The reduction in the CRR is a targeted response to address ongoing liquidity tightness, providing banks with additional funds to support credit growth and economic activity. With inflation projections for FY25 revised to 4.8%, the committee’s neutral stance reflects a cautious approach in balancing persistent inflationary pressures with the need to foster sustainable growth. While challenges on the consumption and investment fronts remain, the policy adjustments underscore the RBI’s focus on maintaining economic stability while ensuring adequate liquidity in the system, said Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance Company.
RBI MPC Live Updates: The Indian stock market benchmark indices traded flat with a negative bias after the announcement of RBI policy today. At 2:30 PM, the Sensex was down 53.39 points, or 0.07%, at 81,712.47, while the Nifty 50 traded 18.30 points, or 0.07%, lower at 24,690.10. The Bank Nifty index was at 53,586.25, down 17.30 points, or 0.03%.
RBI MPC Live Updates: The decision to infuse liquidity by cutting the CRR, injecting over ₹1 trillion into the banking system, is a welcome step. However, this measure alone may not significantly shift market sentiment in the absence of an interest rate cut. Given the current dynamics, Indian markets may experience moderation as FIIs continue their selling. Meanwhile, global trends reveal contrasting trajectories, with US markets up by around 11% while Indian markets remain down by roughly half a percent since their September low, said Shlok Srivastav, Cofounder & COO, Appreciate.
In this evolving environment, diversification across global markets could be a prudent strategy for investors seeking balanced portfolios, improved returns, and exposure to varied growth opportunities, alongside their investments in the promising Indian market, he added.
RBI MPC Live Updates: “Market reacted negatively with the 10 year benchmark bond yield rising by 2-3 bps immediately post RBI policy announcement. Going ahead, we believe markets will be range bound to approximately 10-15 bps from current levels. Despite cash reserve ratio (CRR) cut, liquidity to remain at neutral levels going ahead due scheduled auction outflows and tax outflows which would provide a floor to money," said Prashant Pimple, Chief Investment Officer - Fixed Income, Baroda BNP Paribas Mutual Fund.
RBI MPC Live Updates: The message appears clear, the RBI will not move the repo rate lower till there is absolute confidence in inflation moderating to target. Given that we are at the inflection point for both growth and inflation, February remains live. The critical factor to watch out is the Trump policies after he comes into office and its impact on inflation and currency. Probably providing itself flexibility to intervene in the currency markets, the RBI has moved ahead with a 50-bps reduction in CRR. We now anticipate the first cut in February but can be delayed if currency markets were to turn adverse or the anticipated softening in domestic inflation does not materialize, says Indranil Pan, Chief Economist at YES Bank.
RBI MPC Live Updates: “A detailed deliberation on growth-inflation dynamics while revising growth projections down by 60 bps, alongside the durable liquidity infusion measure points to an impending rate cut in forthcoming policy. While for now, MPC, correctly kept its unmitigated focus on aligning inflation with long term goals and termed the current slowdown in growth as transitory, the direction seems clear on policy path, in line with ongoing global rate cut cycle. The confidence emanates from expectations that inflation will ease in coming months," said Mahendra Kumar Jajoo, CIO – Fixed Income, Mirae Asset Investment Managers (India).
Bond markets reacted with slight uptick in 10 year govt bond yields by 2-3 bps, fair after having eased to hang around recent lows of 6.70% in the run up to the policy. Fixed income markets are expected to remain attractive with a stronger tailwind on policy front in the near term, he added.
RBI MPC Live Updates: “While being cognisant of the incoming growth inflation mix, prudence and practicality required the RBI to address the issue of declining core liquidity. The CRR cut by 50 bps provides adequate signalling with respect to the direction of monetary policy going forward. In the near term we could anticipate other fine tuning liquidity measures such as repo auctions apart from screen-based OMO in case core liquidity tightens further. Given the Q2FY26 CPI projections, in the absence of any incremental inflation shocks, the Feb review could be live for a repo rate reduction," said Rajeev Radhakrishnan, CIO - Fixed Income, SBI Mutual Fund.
RBI MPC Live Updates: “Given a more benign forecast of 4.5% inflation for Q4, there is a good chance of a reduction in repo rate in the next policy. The RBI has addressed concerns on liquidity by lowering the CRR which will coincide with the advance tax flows and quarter end requirements. This will ensure stable liquidity and bond yields for the month. The RBI has also sounded assuring on the forex side given the reserves which can buffer against any shocks, said Madan Sabnavis," Chief Economist, Bank of Baroda.
The market reaction in terms of bond yields and stock indices have been largely neutral to these announcements. We can expect an impact on yields once the CRR funds get released in the market, he added.
RBI MPC Live Updates: We expect the rate cut cycle to begin from February 2025 onwards, while balancing between growth and inflation. The CRR cut of 50 bps in 2 tranches to 4% would help improve the liquidity conditions while supporting growth. We believe this would lend slight support to NIMs for banks. With a rate cut possible in Feb’25, banks with higher share of floating rates would face pressures on margins, as CoF would revise downwards with a lag. The latest data shows convergence of credit and deposit growth rates, mainly owing to slowdown in credit growth. Asset quality challenges especially amongst banks with the higher exposure to the unsecured segments was visible in the previous quarters and we expect stress to persist in H2, thereby keeping credit costs higher in H2, says Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.
Currently, we continue to prefer the larger banks with our top picks being HDFC Bank, ICICI Bank, SBI and Bank of Baroda, he added.
RBI MPC Live Updates: “The move to lower CRR is a welcome step as it releases funds for banks to lend. RBI’s stance on inflation and, therefore, on Repo rate will have long term implications of lowering inflation and stabilising currency. SORR is a much needed benchmark as it incorporates both regulatory rates and market sentiments. Overall a very prudent approach which focuses on long term interests of the country while calibrating the short term mismatch," says Pralay Mondal, MD & CEO, CSB Bank.
RBI MPC Live Updates: “The RBI did not let the temporary spike in inflation deviate from monetary easing. The CRR cut is constructive for liquidity and paves the way for rate cut in February once there is better clarity on inflation. We continue to expect 50-75bps of rate cuts in this cycle and remain constructive on duration," said Anurag Mittal, Head of Fixed Income at UTI AMC.
RBI MPC Live Updates: We cannot guess how the forex market will behave going ahead. There are so many uncertainties. It is a very dynamically evolving situation in the world. At the moment we have no concern at all. Let me say very emphatically that our forex reserves are strong. As and when required we will take more measures. The focus is not just to deal with spillovers, it is an essential part of RBI’s policy to build macroeconomic stability of the domestic system, says RBI Governor Shaktikanta Das.
RBI MPC Live Updates: Our forex reserves are quite robust and adequate. We are confident of dealing with any spillovers, says RBI Governor Shaktikanta Das.
RBI MPC Live Updates: Private firms are hesitant to invest due to moderate demand. The underlying slowdown in growth is due to inflation, and there is no room for knee-jerk reaction. Our assessment indicates growth is beginning to pick up, says RBI Governor Shaktikanta Das
RBI MPC Live Updates: There has been no discussion on BRICS currency. India has not taken any step towards de-dollarisation. Our effort is to de-risk our trade, says RBI Governor Shaktikanta Das.
RBI MPC Live Updates: What the banks do with CRR is their call. The liquidity surplus situation prevails today. We are going into a phase where liquidity will be very tight. Hence, we thought it was a time to normalise CRR levels, says RBI Governor Shaktikanta Das
RBI MPC Live Updates: Expect currency in circulation to rise. We expect tight liquidity conditions in the next few months, along with tax-related outflows, says RBI Governor Das.
RBI MPC Live Updates: Inflation horse made a very valiant effort to bolt. Our effort is to keep it in a tight leash, says RBI Governor Das.
RBI MPC Live Updates: Growth in H2 looks better than H1FY25. RBI will use various policy instruments to restore the inflation-growth balance, says RBI Governor Das.
RBI MPC Live Updates: Inflation has to be brought down in the interest of sustainable growth. MPC remains committed to restore balance between inflation and growth, says RBI Governor Shaktikanta das in post monetary policy presser.
RBI MPC Live Updates: Policy tradeoffs have become even more perplexing with the emerging cracks in the domestic story with the economy stuck in a stagflationary state. And given the challenges around timing and window of conventional rate cuts, and FX cost of rate cuts, a CRR cut of 50 bps was the least costly measure for them, says Madhavi Arora, Lead Economist, Emkay Global Financial Services.
CRR reversal to pre-Covid 4% level implies an infusion of ₹1.2 trillion at a time when core liquidity may steadily move to a deficit ahead with unsterilized FX intervention and CIC leakages. More importantly, this liquidity infusion could lead to better and immediate transmission of cuts as and when the RBI commences the (shallow) cut cycle amid the limited window. Had there been no policy support, the system liquidity deficit would likely have crossed ₹3 - 3.5 trillion by end-March 2025 as per our estimates, she said.
Going ahead, while rate cuts would still be a tricky call, we also keep a watch on unconventional measures, specifically, easing regulatory lending norms gradually ahead in order to re-spur waning credit offtake, Arora added.
RBI MPC Live Updates: The surplus liquidity conditions in the system augur well for faster monetary transmission as and when the window to cut opens-up. The time is ripe for deposits to be locked-in and expect softer borrowing rates in 1H of next year. If inflation moderates, we will see the first rate cut come through in February 2025, says Achala Jethmalani, Economist, RBL Bank.
RBI MPC Live Updates: RBI governor's statement for the latest MPC highlights the increased dilemma on growth-inflation balance, amidst sticky headline inflation and a slowdown in growth seen in Q2. As expected, MPC has attempted to address it by a cut back in CRR by 50 bps while keeping the status quo on the benchmark rates. Higher system liquidity will soften short term interest rates and can reduce the pressure on bank deposit rates, says Suman Chowdhury, Executive Director & Chief Economist, Acuité Ratings.
In particular, RBI's inflation forecast for Q4 has been raised to 4.5% which highlights the challenges of bringing down the headline inflation to near 4%. This, therefore, will continue to keep a question mark on the expected rate cut in February 2025. The new global normal with improved US economy, lower rate cuts by Fed and a stronger USD have also made it difficult to go for a rate cut without a very significant weakness in the growth trajectory, Chowdhury added.
RBI MPC Live Updates: It is encouraging to note RBI asserting its independence amidst pressures of a rate cut arising from fiscal policy makers. However, the timing may not be optimal. An early rate cut will go a long way in reviving Indian economic activity, job creation and private capex in FY26, accounting for any lags between rate cuts and their effect on the real economy. The CRR cut only serves as a band-aid to ease money markets as liquidity tightens from December 2024 to March 2025. This announcement will potentially release ₹90,000 crore in December and ₹1.16 lakh crore by March 2025. The effect is expected to fizzle out beyond that, with banks deploying this additional liquidity to repay some of their non-deposit liabilities. Banks’ liabilities to the rest of the banking system doubled from ₹2.5 lakh crore in 2019 to ₹5 lakh crore by October 2024, says Debopam Chaudhuri, Chief Economist of Piramal Enterprises.
RBI MPC Live Updates: The cut in CRR is positive for the Indian real estate sector, as banks will have higher lending capacity. This directly supports developers to borrow more for development, says Anuj Puri, Chairman - ANAROCK Group.
A repo cut in repo rate would have definitely helped boost housing sales momentum further, particularly since we have seen sales tapering in the last two quarters. However, the continuation of relatively affordable home loan interest rates will attract borrowers from this segment, especially since housing prices saw a significant rise in the last quarter, he added.
RBI MPC Live Updates: RBI’s MPC decided by a 4 to 2 majority to keep the policy repo rate unchanged at 6.50%.
Saugata Bhattacharya, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50%. Dr. Nagesh Kumar and Professor Ram Singh voted to reduce the policy repo rate by 25 basis points.
All the six members of MPC voted for continuing with the neutral stance of monetary policy and to remain unambiguously focused on a durable alignment of inflation with the target, while supporting growth.
RBI MPC Live Updates: As part of the Reserve Bank’s continued efforts to prevent and mitigate digital frauds, an innovative AI / ML based model, namely, MuleHunter.AI has been developed by the Reserve Bank Innovation Hub (RBIH), Bengaluru. This will help the banks to deal with the issue of mule bank accounts expeditiously and reduce digital frauds.
RBI MPC Live Updates: In order to harness the benefits from technologies like AI, tokenisation, Cloud Computing, etc., while addressing the associated risks such as algorithmic bias, explainability, data privacy, etc., RBI will set up a committee comprising of experts from diverse fields to recommend a Framework for Responsible and Ethical Enablement of AI (FREE-AI) in the financial sector.
RBI MPC Live Updates: RBI has decided to permit Small Finance Banks also to extend pre-sanctioned credit lines through the UPI. This will further deepen financial inclusion and enhance formal credit, particularly for ‘new to credit’ customers, said Governor Das.
RBI MPC Live Updates: With a view to further develop the interest rate derivatives market in India and improve the credibility of interest rate benchmarks, the Reserve Bank proposes to introduce a new benchmark - the Secured Overnight Rupee Rate (SORR) - based on all secured money market transactions – overnight market repo as well as TREPS.
RBI MPC Live Updates: The FX-Retail platform, which was launched in 2019, is now proposed to be linked with the Bharat Connect platform of NPCI. This would enable users to transact on the FX-Retail platform through mobile apps of banks and non-bank payment system providers. This will expand the reach of FX-Retail platform, enhance user experience and promote fairness and transparency in pricing with adequate safeguards, said RBI Governor Shaktikanta Das.
RBI Policy Live Updates: RBI Governor Shaktikanta Das announced that the limit for collateral-free agricultural loans will be increased from ₹1.6 lakh per borrower to ₹2 lakh per borrower, aiming to provide greater financial support and stability to farmers, while facilitating higher credit availability in the agricultural sector.
RBI MPC Live Updates: RBI hikes FY25 CPI inflation target from 4.5% to 4.8% and also hikes inflation projections for the next 3 quarters. Here are the latest CPI inflation estimates:
RBI MPC Live Updates: RBI proposes to introduce a new benchmark of secured overnight rupee rate which is based on all secured money market transactions i.,e, overnight market repo and treps.
RBI Policy Live Updates: RBI will launch podcasts as a new medium of communication, aiming to enhance engagement and transparency, said Governor Das.
RBI MPC Live Updates: To tackle the issue of unclaimed deposits, RBI directs banks to segregate beneficiary accounts through Direct Benefit Transfers (DBT). The RBI will closely monitor the progress of these measures to ensure compliance and effectiveness, said RBI Governor Shaktikanta Das.
RBI MPC Live Updates: RBI has decided to raise interest rate ceilings on FCNR-B deposits, effective immediately, along with increasing FCNR deposit rates, said RBI Governor Das. The move aims to make India a more attractive destination for foreign investments.
RBI MPC Live Updates: The Indian stock market benchmark indices, Sensex and Nifty 50, turned positive after RBI Governor Shaktikanta Das announced to slash the cash cash reserve ratio (CRR) by 50 basis points (bps) to 4%. The six-member Monetary Policy Committee (MPC) led by RBI Governor Shaktikanta Das decided to keep the benchmark repo rate unchanged at 6.5% for the eleventh straight meeting, and maintain the monetary policy stance ‘Neutral’.
RBI MPC Live Updates: RBI Governor Shaktikanta Das cuts FY25 GDP growth estimates to 6.6% from 7.2% earlier. Here are the GDP estimates
RBI MPC Live Updates: CRR cut of 50 bps to lead to infusion of ₹1.16 lakh crore into the system, says RBI Governor Shaktikanta Das.
RBI MPC Live Updates: RBI Governor Shaktikanta Das-led Monetary Policy Committee slashed the Cash Reserve Ratio (CRR) by 50 basis points (bps) to 4%
RBI MPC Live Updates: Inflation forecast for FY25 at 4.8%
Q3FY25 - 5.7%
Q4FY25 - 4.5%
Q1FY26 - 4.6%
Q2FY26- 4%
RBI MPC Live Updates: FY25 GDP growth estimates at 6.6%
Q3FY25 6.8%
Q4FY25 7.2%
Q1FY26: 6.9
Q2FY26: 7.3%
RBI MPC Live Updates: Price stability is very important for the people, but growth is also important. Last mile of disinflation is turning out to be prolonged and arduous for economies, says RBI Governor Shaktikanta Das.
RBI MPC Live Updates: RBI Governor Shaktikanta Das-led Monetary Policy Committee (MPC) keeps repo rate unchanged at 6.5% for the eleventh straight meeting, maintains monetary policy stance at ‘Neutral’.
RBI MPC Live Updates: RBI Governor Shaktikanta Das begins his monetary policy speech.
RBI MPC Live Updates: Currently set at 4.5%, the CRR was last reduced in March 2020, during the early days of the COVID-19 pandemic.
A potential CRR cut in the upcoming policy decision could have a significant impact by injecting much-needed liquidity into the banking system. For instance, a 50-basis point reduction could release up to ₹1.2 lakh crore, while a smaller 25-basis point cut could free around ₹60,000 crore. Such measures would provide a boost to banking liquidity which is currently in the deficit while stimulating lending, and support economic growth, said Amit Pabari, MD, CR Forex Advisors.
RBI MPC Live Updates: Rupee could gain support from the RBI’s efforts to manage liquidity in the banking system, whether through a reduction in the CRR or Open Market Operations (OMO) — the central bank’s practice of buying or selling government securities in the open market. This adjustment would enable the central bank to step in more effectively in the forex market through dollar sales whenever required. As a result, we anticipate the Rupee’s downside to remain capped at 85, with the USDINR pair expected to trade within the range of 84.50 to 85 in the short term, said Amit Pabari, MD, CR Forex Advisors
