RBI keeps repo rate unchanged, aims to bring down food inflation

Sandeep Dikshit

New Delhi, June 7

In its first monetary policy review that will guide interest setting for the new government at the Centre, the Reserve Bank of India today decided to keep the key interest rate (repo) unchanged at 6.5 per cent as it wanted to bring down inflation, especially in the food sector.

The repo rate was last hiked in February 2023 and there has been persistent demand from the industry as well as EMI payers for lowering of interest rates. However, with the RBI raising the growth projection for fiscal 2025 to 7.2 per cent from 7 per cent, there is a need to keep the inflation rate down to 4.5 per cent in order to achieve that outcome.

Forex reserves soar

• In relief to motorists, RBI allowed e-mandate for recurring FASTag transactions
• Foreign exchange reserves touched a fresh high of $651.5 billion as on May 31
• RBI hiked threshold for bulk fixed deposits to Rs 3 crore from existing Rs 2 crore

In a move aimed at making travel by road and metro hassle-free, the RBI has allowed processing of recurring transactions through e-mandate, which means users can recharge Fastag and National Common Mobility Card (NCMC) through an automatic replenishment facility.

“The current e-mandate framework requires a pre-debit notification at least 24 hours before the actual debit from the customer’s account. It is proposed to exempt this requirement for payments made from customer’s account for automatic replenishment of balances in FASTag, NCMC, etc. under the e-mandate framework,” the RBI said in a statement.

Speaking at a press conference after the Monetary Policy Committee approved an unchanged lending rate till August 8 when it will meet again, RBI chief Shaktikanta Das said a normal south-west monsoon was expected to boost Kharif production and enhance water storage in reservoirs. On inflation, he said: “We are on the right track and squarely focussed on inflation management” though food inflation remains a concern.

Giving an overview of the macroeconomic fundamentals, the RBI chief said the current account deficit for FY25 is expected to remain well within the sustainable level and foreign exchange reserves have touched a fresh high of $ 651.5 billion as on May 31, 2024.

In a separate decision, the RBI hiked the threshold for bulk fixed deposits to Rs 3 crore from existing Rs 2 crore with a view to improve asset liability management of banks. Bulk fixed deposits earn slightly higher interest rates than retail term deposits as banks offer different rates as part of their liquidity management exercise. “It is a routine review,” said RBI Deputy Governor Swaminathan J.

Das also said export and import regulations under the Foreign Exchange Management Act (FEMA) would be rationalised and the RBI will set up a Digital Payments Intelligence Platform to harness advanced technologies to mitigate payment fraud risks. He also announced that auto replenishment of balance Fastag, NCMC, and UPI-Lite wallets have been brought under the e-mandate framework.