The Reserve Bank of India (RBI) held its bi-monthly monetary policy review on October 9, 2024, where it once again opted to keep the repo rate unchanged at 6.5%. This marks the tenth consecutive time the policy interest rate has remained steady, reflecting RBI’s commitment to balancing inflation control with economic growth. RBI Governor Shaktikanta Das emphasized several key changes that directly impact the common man, including warnings about rising credit card dues and updates on UPI payment limits. Below are the key highlights from the policy review.
1. Repo Rate Unchanged at 6.5%
In a decision aimed at maintaining economic stability, the Monetary Policy Committee (MPC) voted 5:1 to keep the repo rate at 6.5%. This move is consistent with RBI’s ongoing effort to manage inflation while fostering economic growth.
2. MPC Shifts to a Neutral Stance
The MPC has adopted a neutral stance in monetary policy, meaning that future interest rate changes could go either way, depending on how the economic situation unfolds.
3. Economic Growth Steady at 7.2%
RBI continues to forecast a 7.2% GDP growth for the financial year 2024-25. Key economic indicators point to strong activity and the fundamentals of the Indian economy remain robust.
4. Warning on Credit Card Dues
Governor Das sounded a cautionary note about rising consumer loans and credit card dues. As more people in India rely on credit, the central bank is urging caution among banks to prevent potential financial risks.
5. UPI Lite Wallet Limit Increased
In a move to promote digital payments, RBI has raised the limit for UPI Lite wallet transactions from ₹2,000 to ₹5,000. This will make small digital transactions faster and more convenient, especially for daily expenses.
6. UPI 123Pay Transaction Limit Doubled
For feature phone users who rely on UPI 123Pay, the transaction limit has been increased from ₹5,000 to ₹10,000. This aims to bring more people without internet access into the digital payments ecosystem.
7. Inflation Concerns Due to Rising Food Prices
RBI highlighted concerns about inflation, particularly due to rising food prices and adverse base effects. While inflation was under control for much of the year, the coming months may see higher retail inflation.
8. Manufacturing Sector Gaining Momentum
Thanks to rising domestic demand and favorable policies, India’s manufacturing sector is seeing significant growth. This resurgence is expected to boost employment and investment in the coming quarters.
9. Strong Investment in GDP
The share of investment in India’s GDP has reached its highest level since 2012-13, showcasing confidence in the Indian economy. Investments are crucial for long-term growth and development.
10. Indian Rupee Stability
The RBI Governor noted that the Indian rupee has largely remained stable despite global volatility. This stability is important for controlling inflation and maintaining economic balance.
11. RBI Stays Flexible on Cash Management
To ensure liquidity and smooth functioning of the financial system, RBI stated it will remain agile and flexible in its cash management operations, ready to take action as needed.
12. Retail Inflation Forecast Held at 4.5%
Despite inflationary pressures, RBI maintained its forecast for retail inflation at 4.5% for 2024-25, assuming a normal monsoon and stable food prices.
13. Impact of Global Fluctuations
RBI reiterated that despite global uncertainties, India’s monetary policy has been effective in managing inflation and supporting economic growth, with minimal external shocks to the system.
14. Low Cost of Raw Materials Boosts Industry
Lower raw material costs, combined with higher domestic demand, have given a boost to India’s industrial sector, positioning it for strong growth in the near future.
15. Continued Support for Digital Payments
The increased transaction limits for UPI Lite and UPI 123Pay are part of RBI’s broader push to support digital payments and financial inclusion, ensuring that even remote areas can benefit from the ease of digital transactions.
This monetary policy review reflects RBI’s steady approach towards maintaining economic balance while addressing key concerns such as inflation and consumer debt.
