Summary: In the RBI’s Monetary Policy Committee meeting held on August 8, 2024, key rates remained stable: the repo rate at 6.5%, the Standing Deposit Facility (SDF) rate at 6.25%, and the Marginal Standing Facility (MSF) rate at 6.75%. The unchanged repo rate means term and housing loan interest rates are likely to stay the same. The Committee decided to continue its stance of withdrawing accommodation, aiming to tighten the money supply to control inflation. The real GDP growth rate forecast for Q4 FY24-25 is 7.2%. Notable changes include an increase in the UPI tax payment limit from Rs 1 lakh to Rs 5 lakh per transaction, a proposal for continuous cheque clearing to speed up processing, and more frequent credit information reporting from monthly to fortnightly. These measures are designed to support economic stability and improve financial transactions.
RBI Monetary Policy Highlights 8th August 2024
- Repo Rate remains unchanged at 6.5%
Repo Rate means rate charged by Reserve Bank of India to Lend money to Commercial Banks
Impact: Term Loan, Housing Loan interest rates are likely to remain unchanged.
Standing Deposit Facility (SDF) remains unchanged at 6.25%
Standing Deposit Facility (SDF) rate is a rate at which the RBI accepts uncollateralised deposits on an overnight basis, from banks
Marginal Standing Facility (MSF) Rate remains unchanged at 6.75%
MSF is a penal rate charged by RBI to Commercial banks especially when they (Commercial Banks) have completely exhausted of all borrowing assistance. MSF is hence more than the Repo rate.
- The Monetary Policy Committee (MPC) also decided to continue withdrawal of accommodation stance
An accommodative stance means the central bank is prepared to expand the money supply to boost economic growth. Withdrawal of accommodation means reducing the money supply in the system which will rein in inflation further
Impact: Inflation rate likely to be reduced or stabilize as money supply in the market is reduced
- MPC has decided to focus on inflation and support price stability to ensure growth.
- The real GDP Growth rate for Q4 FY24-25 is projected at 7.2 per cent as compared to Q4 FY2023-24
How GDP is calculated
Y = C + I + G +NX
Y = GDP
C = Consumption spending by households
I = Investment spending by businesses and households
G = Government purchases of goods and services
NX = Export minus Import
Base year for calculating Real GDP of India is FY 2011-12
Key Announcements:
- UPI tax payment limit has been hiked from Rs 1 lakh to Rs 5 lakh per transaction.
Impact: This will create ease in payment of tax
- It has also been proposed to introduce continuous cheque clearing. Steps to speed up clearance of cheques to few hours
Impact: This will help the receiver to get is check clear bit early and hence opportunity cost of a day or two is saved with regards to time taken to clear the cheques
- RBI has decided to increase the frequency of credit information reporting by credit institutions (CIs) to credit information companies (CICs) from a monthly basis to a fortnightly basis or at such shorter
Impact: This will enable a clearer picture of credit score of the borrower
Please note: Views expressed here are personal, please have your thorough check before making any decision on basis of this article.
Author Bio
