Reserve Bank of India kept rates on hold for the sixth successive time in line with expectations but surprised markets by projecting 7% growth for 2024-25 as against 6.7% earlier. RBI governor Shaktikanta Das said the transmission of the 250-basis-point increase in the policy rate between May 2022 and Feb 2023 was not complete. While half of bank loans, including home loans, are linked to the repo rate, the other half are linked to the cost of deposits or are fixed and yet to fully reflect the market rates.
RBI projected 4.5% inflation for FY25, and trimmed price forecasts for the first and third quarters of the next financial year.
In his monetary policy statement, Das said that the battle against inflation was far from over. “The last mile of disinflation is always the most challenging and that has to be kept in mind,” he said. Das said that RBI would persist in maintaining a scarcity of money to control prices.
The monetary policy committee voted with a majority of 5:1 to keep the repo rate (at which RBI lends to banks) unchanged at 6.5%. The other rates at which RBI lends to banks - the standing deposit facility and the marginal standing facility - remain at 6.25% and 6.75%, respectively.