RBI keeps repo rate unchanged at 6.5%

The Reserve Bank of India (RBI) on Friday kept its key lending rate unchanged at 6.5% for the seventh consecutive time. The decision was taken by a 5:1 majority at the bi-monthly Monetary Policy Committee (MPC) meeting, said RBI Governor Shaktikanta Das. An unchanged repo rate means the loan interest rates too are likely to remain unchanged.

It may be noted that the standing deposit facility (SDF) also remains unchanged at 6.25% and the marginal standing facility at 6.75%. The decision was largely in line with what economists had predicted.

Das said in his monetary policy statement that the priority of monetary policy continues to be the achievement of the 4% inflation target amidst robust growth. He also highlighted the need for the monetary policy to maintain an actively disinflationary stance at this stage.

However, uncertainties in food prices continue to pose challenges, he said, adding that the MPC remains vigilant to the upside risk to inflation that may derail the path of disinflation. "Food inflation continues to exhibit considerable volatility which is impeding the ongoing disinflation process," he said.

The RBI Governor said the country is projected to grow 7% this financial year, with 7.1% growth expected in the April-June quarter and 6.9% in the July-September quarter. "The risks are evenly balanced."

The Indian rupee has remained largely rangebound and is the most stable among the major currencies, said Mr Das. "Compared to the last three years, the rupee exhibited the lowest volatility in FY24. The relative stability of the rupee reflects sound macroeconomic fundamentals and external position," he added.

He also said that India's liquidity situation improved in March while the average borrowings under the marginal standing facility, which allows banks to borrow funds, moderated.

India continues to remain the largest receiver of remittances with the country's foreign portfolio investment seeing a significant turnaround, the RBI Governor said, adding that its forex reserves are now at a record high.