Mumbai (PTI): The Reserve Bank of India expectedly kept benchmark interest rate and stance unchanged for the ninth straight policy meeting, saying it cannot afford to look through persisting high food inflation and has to remain vigilant to prevent spillover.
Retaining its unambiguous focus on inflation, the Monetary Policy Committee (MPC), which consists of three RBI and three external members, kept the benchmark repurchase or repo rate unchanged at 6.50 per cent.
Four out of the six members of MPC voted in favour of the rate decision. The panel, whose four-year term ends in October, also decided to retain a policy stance at "withdrawal of accommodation" to aid MPC's focus on bringing inflation towards its 4 per cent target.
Inflation climbed to 5.08 per cent in June, primarily driven by the food component.
RBI Governor Shaktikanta Das said food inflation remains "stubbornly" high.
"Without price stability, high growth cannot be sustained," he said, adding that "monetary policy must continue to be disinflationary".
He said the MPC could have looked through high food inflation if it was transitory. "But in an environment of persisting high food inflation, as we are experiencing now, the MPC cannot afford to do so. It has to remain vigilant to prevent spillovers or second round effects from persistent food inflation and preserve the gains made so far in monetary policy credibility."
The MPC last revised interest rate in February 2023, when it was hiked to 6.5 per cent.
The status quo by RBI comes amid varied central bank action in advanced economies. While the Bank of England reduced interest rates last week, Bank of Japan hiked rates to their highest levels since 2008. Also, fears of a US recession have risen on the back of weak employment numbers, piling up pressure on the Federal Reserve to start cutting rates to support the economy.
RBI retained India's GDP growth forecast at 7.2 per cent and headline CPI inflation at 4.5 per cent for the current fiscal 2024-25.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, with growth remaining robust, the MPC still has room to hold on to policy stance to get confirmation on the disinflationary trend.
"We continue to expect scope for change in stance in the October policy with rate cuts beginning from December. The prospects of simultaneous change in stance and rate cuts could increase depending on how domestic inflation and global environment transitions," she said.
Radhika Rao, Executive Director and Senior Economist, DBS Bank said, policy guidance reinforced that domestic considerations will be prioritised, despite a sharp buildup in rate cut pricing for the US Fed.
"The RBI MPC retained its cautious tone on inflation, in the face of an anticipated passthrough from perishables price pressures and tariff adjustments. With domestic demand conditions calling for a focus on inflation, we expect the policy rate to stay on hold for the rest of the year," Rao added.
The Governor flagged alternative investment avenues becoming more attractive to retail customers leading to bank deposits trailing loan growth.
Though he did not specify the alternate avenues, he may have been referring to investors flocking the stock markets.
"As a result, banks are taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand. This, as I emphasised elsewhere, may potentially expose the banking system to structural liquidity issues," he said urging banks to focus more on mobilisation of household financial savings through innovative products and services.
Das also warned of excess leverage through retail loans as well as growing top-up housing loans.
While growth in retail loans calls for careful assessment and calibration of underwriting standards and post-sanction monitoring, top-up housing loans may get deployed in unproductive segments or for speculative purposes in absence of no strict monitoring of end use of funds.
Among the measures announced on Thursday included raising of limit for tax payments through UPI from Rs 1 lakh to Rs 5 lakh per transaction, clearing of cheques within few hours, and introduction of a facility of delegated payments in UPI.
"Under the current monetary policy setting, inflation and growth are evolving in a balanced manner and overall macroeconomic conditions are stable. Growth remains resilient, inflation has been trending downward and we have made progress in achieving price stability; but we have more distance to cover," Das said.
"The progress towards our goal of price stability has been uneven due to large and persistent supply side shocks, especially in food items. We, therefore, need to remain vigilant to ensure that inflation moves sustainably towards the target, while supporting growth. This approach would be net positive for sustained high growth."
Let the Truth be known. If you read VB and like VB, please be a VB Supporter and Help us deliver the Truth to one and all.
Bengaluru, Sep 8: KL Rahul's gumption, which helped him pile a patient fifty, found no resonance among his colleagues as India B pacers led by Yash Dayal pushed India A to a 76-run defeat on the fourth and final day of their Duleep Trophy match here on Sunday.
Chasing 275, India A were bundled out for 198 in their second innings as left-arm seamer Dayal (3/50), with able support from his colleagues Mukesh Kumar (2/50) and Navdeep Saini (2/41), led the India B attack.
Rahul top-scored for 'A' with a 51.
In the first session of the day, India B made 184 all out in their second essay to muster a handy overall lead of 274.
The India A chase began on a shaky note as Mayank Agarwal departed in the second over itself, wafting Dayal away from his body to Nitish Kumar Reddy, who made a wonderful diving catch at second slip.
That brought Riyan Parag to the middle and the right-hander followed the path set on Saturday by Rishabh Pant and Sarfaraz Khan.
Parag took on the bowlers and pacer Mukesh bore the brunt of his aggression, getting smoked for two sixes and the second maximum touched the roof of the Chinnaswamy Stadium over the mid-wicket region.
Parag added 48 runs for the second with a rather subdued Shubman Gill, who was dropped by Nitish Reddy at slips off Mukesh on 16, and 31 came off the former's bat in just 18 balls.
But the approach was tough to sustain considering the kind of assistance the bowlers were getting here, and soon his massive hoick off Dayal took an edge off Parag's bat en route to stumper Rishabh Pant.
Gill (21) departed soon, falling to Saini for the second time in the match and on this occasion, he edged the pacer to Pant.
Dhruv Jurel poked Dayal well outside off-stump to Yashasvi Jaiswal at gully, as India batters perished to a combination of bowlers' persistence on that channel and their own carelessness.
They took the lunch at a queasy 76 for four that soon transpired into 99 for six after the dismissal of Shivam Dube and Tanush Kotian, an hour into the lunch.
However, Rahul batted out 180 minutes 121 balls and milked 42 runs for the seventh wicket with Kuldeep Yadav to delay the inevitable.
The standout shot in an otherwise dour innings was a whistling on drive off Mukesh that fetched him a boundary.
But Mukesh had his revenge soon when Rahul feathered a cut off him to Pant, who completed five catches in this innings, soon after reaching his fifty with a single off Saini.
It effectively signalled the end of the road of for India A, though Akash Deep (43, 42b, 3x4, 4x6) gave a few moments of fun with a cavalier innings.
But beyond the entertainment value, it always was a case of when more than if.
Earlier, resuming from their overnight score of 150 for six India B could only 34 runs more to the total before getting bundled out.
Pacer Akash, whom Sarfaraz Khan carted around for five fours in a row the previous day, found his mojo to add the scalps of Washington Sundar and Saini to complete a five-wicket haul (5/56).
The spell will keep his name floating among the contenders when the selectors sit together soon to pick up squad for two-match Test series against Bangladesh.