RBI MPC Meet Outcome Highlights: From GDP To UPI Limit, Top 5 Takeaways From Shaktikanta Das’ Speech

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) delivered a policy decision largely in line with market expectations during its October 9 meeting, holding the repo rate steady at 6.5% while tweaking its policy stance to "neutral" from "withdrawal of accommodation." This move signals the central bank's intent to maintain flexibility amid rising inflation concerns and uncertain global conditions. Governor Shaktikanta Das emphasized the risk of sticky inflation, especially with a likely uptick in the September Consumer Price Index (CPI), driven by base effects and fuel price increases.

Here are five key takeaways from the RBI's October monetary policy meeting:

1. Repo Rate Stays at 6.5% Despite Global Trends

The RBI chose to leave the repo rate, the rate at which it lends to commercial banks, unchanged at 6.5%-marking the tenth consecutive time the rate has remained steady. This decision diverges from the recent rate cuts implemented by the US Federal Reserve, which reduced rates by 50 basis points in September and is expected to cut again later this year.

Governor Das and the MPC members voted 5:1 in favour of holding the rate, while all six members agreed to adjust the policy stance to "neutral." This new stance, which replaces the "withdrawal of accommodation" approach, reflects the RBI's cautious stance in a volatile global economic environment.

2. Inflation Worries Persist, With No Change in FY25 Projections

Inflation continues to be a key area of concern for the RBI. The central bank maintained its overall inflation projection for FY25 at 4.5% but highlighted risks from food and fuel price fluctuations. Governor Das noted that the headline inflation rate for July and August had declined, largely due to favourable base effects. However, core inflation (which excludes food and fuel) increased during these months.

The RBI made slight adjustments to its quarterly inflation projections. For the second quarter of FY25 (Q2FY25), the inflation forecast was cut to 4.1% from 4.4%, but for Q3FY25, it was raised to 4.8% from 4.7%. The central bank also trimmed its inflation estimates for Q4FY25 to 4.2% (down from 4.3%) and for Q1FY26 to 4.3% (down from 4.4%).

Governor Das warned that the September CPI is expected to rise, driven by base effects and higher fuel prices. He also pointed out that while food inflation had shown some correction, certain categories like vegetables and pulses continued to see price pressures.

3. India's Growth Prospects Remain Strong

Despite global economic headwinds, the RBI remains optimistic about India's growth trajectory. The central bank kept its GDP growth projection for FY25 unchanged at 7.2%. However, it made adjustments within the fiscal year, revising the growth forecast for Q2FY25 down to 7% from 7.2%, but raising projections for the last two quarters of the year. The GDP growth forecast for Q3FY25 was increased to 7.4% from 7.3%, and for Q4FY25 to 7.4% from 7.2%. For the first quarter of FY26, the growth outlook was also raised slightly to 7.3% from 7.2%.

This outlook reflects the RBI's confidence in India's domestic demand and economic resilience, even as global conditions-such as rising oil prices and geopolitical tensions-pose risks.

4. UPI Transaction Limits Enhanced

The RBI announced an increase in the per-transaction limit for UPI 1 2 3 Pay from Rs 5,000 to Rs 10,000. This is expected to facilitate higher-value transactions in rural and underserved areas where UPI 1 2 3 Pay is commonly used. Additionally, the UPI Lite wallet limit has been raised from Rs 2,000 to Rs 5,000, and the per-transaction limit for UPI Lite has been increased from Rs 100 to Rs 500.

5. Risks from Unsecured Loans Highlighted

Governor Das also addressed concerns over the rising risks in unsecured loan segments, including personal loans, credit cards, and microfinance. He stressed that banks and non-banking financial companies (NBFCs) must remain vigilant in managing these risks, particularly as credit to these sectors continues to grow.

The RBI will closely monitor developments in this area and take necessary actions to prevent stress buildup. Das also highlighted the need for banks to strengthen their underwriting standards and post-sanction monitoring to ensure the quality of their loan portfolios. Additionally, he underscored the importance of addressing potential risks from inoperative deposit accounts, cybersecurity threats, and "mule accounts" used for fraudulent activities.