RBI Monetary Policy Committee Meeting: 05th-07th December, 2022
By: Jay Patel | 7 December, 2022
“India is widely seen as a bright spot in an otherwise gloomy world” – Shaktikanta Das
- Reserve Bank monetary policy committee (MPC) meeting held on December 7 increased repo rates by 35 Basis points to 6.25% with immediate effect. Repo Rate (or Repurchase Option) is the rate at which RBI provide loans to commercial banks or the rate at which banks borrow money from RBI. Hike was in line with market expectation with majority of MPC member in favor of the hike.
- Consequently, Standing Deposit Facility (SDF) rate stands adjusted to 6%, Marginal Standing Facility (MSF) rate & bank rate at 6.5% and Fixed Reverse Repo Rate stands at 3.35%.
- RBI believes fight against inflation is not over and inflation is set to hover above 4% target over the next 12 months amid higher food & energy prices and global spillovers. Inflation has remained above RBI’s target cushion for 10 consecutive months which led repo rates to its highest level since 2018.
- Central Bank lowers India’s FY23 GDP growth forecast from 7% to 6.8%. Earlier World Bank has lower India GDP growth forecast for FY23 to 6.9%. We can analyze RBI’s cautious nature amid growth projection so as to provide cushion against unexpected economic stagnation.
- RBI’s MPC decided to remain focused on ‘Withdrawal of Accommodative stance’ to ensure inflation remain within target going forward while supporting growth.
- RBI Governor, Shaktikanta Das estimated economic growth for 3rd quarter FY23 at 4.4% vs. 4.6% earlier and 4.2% vs. 4.6% earlier for 4th quarter FY23.
- Shaktikanta Das remains optimistic regarding India’s financial System and corporate health. Bank credits are growing in double digits for 8 months now.
- According to RBI Survey, consumer confidence has improved further. Manufacturing and infrastructure firms are optimistic about India’s outlook.