RBI keeps lending rate unchanged at 6.5%

The RBI's announcement comes days after the Lok Sabha elections results were announced and ahead of the Budget 2024.

For the fiscal year 2025, the GDP growth is projected at 7.2%, up from 7 percent in FY 2024. 

"The GDP growth that we are now projecting for 2024-2025 is 7.2%," said RBI Governor Shaktikanta Das.

Das said deflation in fuel prices is underway while food inflation continues to remain elevated. 

The RBI Governor says the central bank is committed to keep the inflation rate to the target of 4 percent. 

The BSE Sensex, which witnessed a bloodbath on the poll result day, is now in green after the RBI projected the GDP at 7.2%.

Das said the Indian economy is "resilient". 

Commenting on the RBI monetary policy, Senior Managing Director of Essar Capital Ltd, Sanjay Palve, said, "Today's announcement by the Reserve Bank of India to keep the repo rate unchanged at 6.5 percent for the eighth consecutive time reflects a prudent and balanced approach to managing the country's economic health."

"By maintaining the repo rate, the RBI has provided stability in external benchmark lending rates, which is a welcome relief for borrowers as their EMIs will not rise," Sanjay Palve said. "This decision supports a stable financial environment, allowing us to continue focusing on sustainable growth and strategic investments."

"We remain committed to leveraging this period of stability to drive innovation and efficiency across our operations, contributing to India's economic resilience and progress. The upward revision of the FY25 GDP projection to 7.2 percent is also a positive indicator of our robust growth trajectory,” Palve added.

Reacting to the development, Chief Economist and Executive Vice President of HDFC Bank, Abheek Barua, said, "The RBI remains in a wait and watch mode to assess domestic developments like the monsoon performance, food inflation, and the new fiscal strategy before moving on rates. We continue to see the possibility of a rate cut in Q4 2024."

"Despite the governor's emphasis that monetary policy decisions are driven primarily by domestic considerations, we think that any rate cut action could end up being aligned with the timing of the Fed’s rate cut cycle to limit financial market volatility," Barua said.

"On the regulatory front, the increase in bulk deposit limit to INR 3 crore from INR 2 crore, signals the RBI’s intention to encourage banks to garner greater retail deposits to fund credit growth," he added.

Executive Vice Chairman of Shriram Finance Umesh Revankar said, "With headline inflation moderating, liquidity remaining stable and growth figures being impressive, many observers felt that maybe this time, the MPC may want to consider adopting a dovish stand. However, with the geo-political situation still remaining volatile and India’s food inflation staying elevated, the RBI has rightly prioritised caution by maintaining status quo on policy rates."

"The RBI’s revised projection of a Real GDP growth rate of 7.2 percent for FY25 compared to 7 percent earlier is a sign of confidence in the Indian economy’s resilience, while the proposal to establish a Digital Payments Intelligence Platform promises to fortify the digital payments ecosystem, which will be further boosted by the inclusion of various recurring payments under the e-mandate framework,” Revankar said.