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In a much-anticipated move, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has decided to maintain the status quo on key interest rates for the ninth consecutive time. The repo rate remains unchanged at 6.5%, while the stance of 'withdrawal of accommodation' is upheld. This decision, made by a majority vote of 4:2, comes amidst rising food prices and a delicate balancing act between managing inflation and supporting economic growth.
Governor Das emphasized the importance of maintaining the current monetary policy stance to manage inflation risks while supporting economic growth. The high food prices, driven by poor weather and structural farming issues, are a significant concern. He noted that food inflation, which constitutes 46% of headline inflation, cannot be ignored despite the fall in core inflation.
The RBI remains committed to aligning inflation to its 4% target on a durable basis. The Governor highlighted the potential relief expected from healthy kharif sowing and an active southwest monsoon. Despite moderated credit growth in some sectors, personal loans continue to grow rapidly, requiring careful monitoring and reassessment of underwriting standards.
The RBI expressed concerns about banks' structural integrity issues as alternative investment avenues attract more retail investors, leading to a drop in bank deposits. Das urged banks to focus on mobilizing household savings and leveraging their vast branch networks. Additionally, the recent global tech outage underscores the need for robust risk management processes to minimize operational disruptions.
The RBI's decision to maintain the status quo on interest rates reflects a cautious approach amidst rising inflation and global economic uncertainties. The focus on managing inflation, supporting economic growth, and addressing structural challenges indicates the central bank's commitment to ensuring financial stability and resilience in the Indian economy.
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