The Monetary Policy Committee of the Reserve Bank of India, chaired by Governor Shaktikanta Das, unveiled several important policy updates during its December 2024 meeting. These measures reflect a balanced approach to promoting economic growth while tackling inflation and addressing liquidity in the banking system.
The Reserve Bank of India by a 4:2 majority decided to keep the policy interest rates and its monetary stance unchanged with benchmark interest rates at 6.5%. The given article presents some key highlights of the RBI Monetary Policy Meeting 2024 and also explains some of the rules related to it.
RBI Monetary Policy Meeting 2024
The RBI Monetary Policy Meeting 2024 highlights the RBI’s calibrated approach to navigate a challenging economic landscape while prioritizing financial stability and growth.
repo rate unchanged
- The MPC, with a 4:2 majority, decided to keep the repo rate at 6.5%, maintaining the “back to housing” stance.
- The decision emphasizes the need to keep an eye on inflation trends and economic conditions.
Reduction in Cash Reserve Ratio (CRR)
- CRR has been cut by 50 basis points, bringing it to 4% with immediate effect.
- The move will infuse ₹1.16 trillion into the banking system, enhancing liquidity and supporting credit availability.
Revised GDP growth forecast
- The GDP growth estimate for FY2015 has been reduced to 6.6% from the earlier estimate of 7.2%.
- This adjustment reflects global uncertainties and domestic economic challenges.
inflation forecast adjustment
- CPI inflation expectations for FY2015 have been raised to 4.8% from 4.5% earlier.
- Governor Das stressed the importance of vigilance in monitoring food price shocks and supply side disruptions.
liquidity management measures
- The cut in CRR is aimed at improving the liquidity of the banking sector, facilitating easier credit flow to businesses and consumers.
Macro-economic outlook
- Governor Das highlighted the need for continued policy interventions to ensure price stability while promoting economic resilience amid global headwinds.
- The central bank remains committed to achieving its medium-term inflation target of 4%.
What is monetary policy?
Monetary policy relates to the strategy adopted by the central bank with respect to the use of the monetary instruments at its disposal to pursue the objectives outlined in the law. The primary goal of RBI’s monetary policy is to maintain price stability while keeping in mind the objective of promoting economic growth.
- Ensuring price stability is an essential precondition for achieving sustainable development.
The amended RBI Act of 1934 also includes provisions for the Government of India to set an inflation target in consultation with the Reserve Bank. (4%+-2%) Once every five years.
monetary policy committee
under Section 45ZB of the amended RBI Act, 1934, The central government has the right to form six-member MPC Tasked with setting the policy interest rate necessary to meet the inflation target. The first MPC was established on 29 September 2016.
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will meet to formulate its response to the Government of India regarding the high levels of inflation in the country.
Member of the Monetary Policy Committee
The MPC consists of six members, the Governor of the RBI is the Chairman of the MPC, the Deputy Governor of the RBI is in charge of monetary policy, one member is nominated by the Board of the RBI, and three members are appointed by the Central Government. Is.
| monetary policy committee | |
| Chairman (Governor of RBI) | Shri Shaktikanta Das |
| Incharge of Monetary Policy (Deputy Governor of RBI) | Dr. Michael D. Patra |
| Member 1 (Nominated by the Central Board of RBI) | Dr. Rajeev Ranjan |
| member 2 | Ram Singh |
| member 3 | Dr. Nagesh Kumar |
| member 4 | Saugata Bhattacharya |
RBI Monetary Policy 2024: Highlights
The table below presents some of the highlights of the review meeting of the Monetary Policy Committee held in December 2024.
| Highlights of MPC meeting | |
| repo rate | 6.50% |
| reverse repo rate | 3.35% |
| Standing Deposit Facility (SDF) | 6.25% |
| Marginal Standing Facility (MSF) | 6.75% |
| Bank rate | 6.75% |
| Cash Reserve Ratio (CRR) | 4% |
| Statutory Liquidity Ratio (SLR) | 18.0% |
| Gross Domestic Product Growth Forecast(FY25) | 6.6% |
| Inflation Estimates (FY25) | 4.8% |
| Agricultural Loan Collateral Limit | Rupee. 2 lakh crores |
Some important terms related to monetary policy
Here we will understand the definition of some important instruments of monetary policy like repo rate, SLR, SDF, CRR etc. The table below provides some basic definitions of terms related to RBI monetary policy.
| Definitions of Terms Related to Monetary Policy | |
| repo rate | The interest rate at which the Reserve Bank provides short-term/overnight funding to banks using government and other authorized securities as collateral through the Liquidity Adjustment Facility (LAF). |
| reverse repo rate | The interest rate at which the Reserve Bank extracts excess liquidity from banks overnight using eligible government securities as collateral through the Liquidity Adjustment Facility (LAF). |
| Marginal Standing Facility (MSF) |
This is the rate at which banks can borrow money overnight from the RBI by presenting authorized government documents. Securities.
|
| Statutory Liquidity Ratio (SLR) | The ratio of net demand and time liabilities (NDTL) that a bank must hold in safe and easily convertible assets, which include unencumbered government securities, cash and gold. Changes in the SLR often affect the amount of funds available within the banking system for lending to private enterprises. |
| Bank rate | Bank rate refers to the rate at which the RBI is ready to purchase or rediscount bills of exchange or other commercial papers. This has been disclosed as per Section 49 of the RBI Act, 1934. |
| Cash Reserve Ratio (CRR) | The average daily balance that a bank must maintain with the Reserve Bank is expressed as a percentage of its net demand and time liabilities (NDTL), as prescribed by notifications published in the Gazette of India. |
