Comment on RBI Credit Policy by Mr. Abheek Barua, Chief Economist - HDFC Bank

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RBI Policy Comment

Mumbai, June 07, 2024: As expected, the RBI kept its policy rate and stance unchanged. Although, the MPC decision saw two dissents instead of the one seen in the previous policy. The one positive out of the policy was the upward revision in the GDP growth forecast to 7.2% from 7% earlier for FY25. On the other hand, inflation forecasts were kept unchanged.

The RBI remains in a wait and watch mode to assess domestic developments like the monsoon performance, food inflation, and the new fiscal strategy before moving on rates. We continue to see the possibility of a rate cut in Q4 2024.

Despite the governors’ emphasis that monetary policy decisions are driven primarily by domestic considerations, we think that any rate cut action could end up being aligned with the timing of the Fed’s rate cut cycle to limit financial market volatility.

On the regulatory front, the increase in bulk deposit limit to INR 3 crore from INR 2 crore, signals the RBI’s intention to encourage banks to garner greater retail deposits to fund credit growth.