RBI decided not to change the repo rate

The Reserve Bank of India (RBI) has decided to keep things steady by not changing their lending rate, also known as the repo rate. This is what everyone expected, and it's set at 6.5%, as they announced in October.

So, what's the deal with this repo rate? Well, it's like the interest rate the RBI charges other banks when they borrow money. 

But that's not all. The Monetary Policy Committee (MPC) also voted 5 to 1 to focus on "withdrawal of accommodation," which basically means they want to keep an eye on inflation and might raise interest rates if needed.

The RBI thinks inflation (that's the rise in prices of stuff) might stay higher than what they're comfortable with until March 2024.

According to the RBI Governor, the global economy isn't exactly back to normal yet. It's slowing down in some places and certain industries.

On the other hand, The RBI estimated that India's GDP is going to grow even faster. They estimate a growth of 7% for the year 2024, up from the earlier estimate of 6.5%. They're feeling pretty optimistic about it, especially after looking at the data for October and November.

Inflation projections for this year stayed the same at 5.4%, and so did the projections for the next two quarters. The RBI also shared some inflation estimates for 2025 – 4% for September and 4.7% for December.

The Marginal Standing Facility (MSF) and Standard Deposit Facility (SDF) rates are also unchanged at 6.75% and 6.25%, respectively. The RBI noticed that banks are using these facilities more, so they've come up with a plan to make things easier during weekends and holidays starting December 30, 2023.

Great news for those in the banking world! The RBI is introducing a unified regulatory framework on connected lending. And, if you're into digital payments, the limit for UPI payments at hospitals and for education has been bumped up to ₹5 lakh per transaction from ₹1 lakh.

Everyone seems pretty happy with these decisions. CS Setty, the MD of SBI, thinks it's a positive move, especially the reversal of liquidity facilities on weekends and holidays. And Nilesh Shah of Kotak Mahindra AMC is praising the RBI and the government for taking us from the "Fragile 5" to revising GDP growth upwards.

But hold on, don't start expecting interest rate cuts just yet. The Governor says it's too soon for that, and the Monetary Policy Committee isn't leaning towards a "neutral" stance anytime soon.

So, that's the scoop from the RBI.

Will deliver the next news tomorrow.

Until then...

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