RBI Monetary Policy Committee Meeting – Highlights

September 30, 2022

The MPC has lowered the GDP forecast and increased the repo rate by 50 basis points.

Key Highlights

The Reserve Bank of India (RBI) has increased the repo rate by 50 basis points to 5.90 per cent, which is a three-year high.
This makes funding expensive for existing and new borrowers. For existing borrowers, all home, car, personal and education loans on floating rates will become costly.
It will also cause huge burden on household expenses due to rise in prices of almost goods and services.
The spike in repo rate is a consequence of high inflation, Ukraine crisis, aggressive global central bank policies and crisis in financial markets caused by macroeconomic uncertainties.
This is the fourth consecutive rate hike after a 40 basis points increase in May and 50 bps increase each in June and August.
The central bank has increased the benchmark rate by 1.90 per cent since May to bring down domestic retail inflation, which is staying above the tolerance limit of 6 per cent each month.
The rates for the standing deposit facility and the marginal standing facility have also been hiked by 50 basis points to 5.65 per cent and 6.15 per cent respectively.
The growth of India’s gross domestic product or GDP in April-June was among the highest in the world.
However, the Monetary Policy Committee forecasts a decline in the real GDP growth for the current year from the earlier prediction of 7.2 per cent to 7 per cent.
The GDP growth in July-September is estimated to be at 6.3 per cent and for October-December it is estimated to reach 4.6 per cent.
The GDP growth in January-March is forecasted to be at 4.6 per cent and for the first quarter of the next financial year, it is expected to be at 7.2 per cent.

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