The 14-day VRRR auction conducted on December 01, 2023 and subscribed for ₹22,468 crore is maturing and allowed to be reversed on December 15, 2023. Furthermore, in view of likely outflows from the banking system on account of advance tax and GST payments, it has been decided to conduct a 7-day Variable Rate Repo auction on December 15, 2023, Friday, in lieu of the main operation, as under:

The Reserve Bank has today released data on Reserve Money for the week ended December 08, 2023 and Money Supply for the fortnight ended December 01, 2023. Ajit Prasad Director (Communications) Press Release: 2023-2024/1473

In our monetary policy statement of April 2016, we stated that we would watch macroeconomic and financial developments in the months ahead with a view to responding as space opens up. Incoming data since then show a sharper-than-anticipated upsurge in inflationary pressures emanating from a number of food items (beyond seasonal effects), as well as a reversal in commodity prices. A strong monsoon, continued astute food management, as well as steady expansion in supply

On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (October 6, 2023) decided to:

• Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent.

The standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

• The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

The main considerations underlying the decision are set out in the statement below.

Assessment

Global Economy

2. Global growth is losing momentum. Inflation is easing gradually but remains well above target in major economies. Concerns about higher for longer rates are imparting volatility to global financial markets. Sovereign bond yields have hardened, the US dollar has appreciated, and equity markets have corrected. Emerging market economies (EMEs) are experiencing currency depreciation and volatile capital flows.

Domestic Economy

3. Real gross domestic product (GDP) posted a growth of 7.8 per cent year-on-year (y-o-y) in Q1:2023-24 (April-June), underpinned by private consumption and investment demand.

4. South-west monsoon rainfall recovered during September and ended 6 per cent below the long period average. The acreage under kharif crops was 0.2 per cent higher than a year ago. The index of industrial production rose by 5.7 per cent in July; core industries output expanded by 12.1 per cent in August. Purchasing managers’ indices (PMIs) and other high frequency indicators of the services sector exhibited healthy expansion in August-September.

5. On the demand front, urban consumption is buoyant while rural demand is showing signs of revival. Investment activity is benefitting from public sector capex. Strong growth is seen in steel consumption, cement production as well as in imports and production of capital goods. Merchandise exports and non-oil non-gold imports remained in contraction in August, although the pace of decline eased. Services exports improved in August.

6. CPI headline inflation surged by 2.6 percentage points to 7.4 per cent in July due to spike in vegetable prices, before moderating somewhat in August to 6.8 per cent. Fuel inflation edged up to 4.3 per cent in August. Core inflation (i.e., CPI excluding food and fuel) softened to 4.9 per cent during July-August 2023.

7. As on September 22, 2023, money supply (M3) expanded by 10.8 per cent (y-o-y) and bank credit grew by 15.3 per cent. India’s foreign exchange reserves stood at US$ 586.9 billion as on September 29, 2023.

December 8, 2023 Statement on Developmental and Regulatory Policies This Statement sets out various developmental and regulatory policy measures relating to (i) Financial Markets; (ii) Regulations; and (iii) Payment Systems and Fintech.

As 2023 comes to an end and a new year begins, the long-awaited normality still eludes the global economy. The years 2020 to 2023 will perhaps go down in history as the period of ‘Great Volatility’, comprising a host of black swan events in quick succession. The global economy is showing signs of slowdown, though unevenly across geographies and sectors. The Emerging Market Economies (EMEs) as a group have remained resilient during the current bout of volatility, unlike previous episodes. While headline inflation has receded from the highs of last year, it remains above target in many countries. Core inflation continues to be sticky, impeding the last mile of disinflation. Major central banks have kept rates on hold while refraining from forward guidance in view of the prevailing uncertainties. Financial markets remain volatile in their quest for definitive signals about the future path of interest rates.

The Reserve Bank has today released data on Reserve Money for the week ended December 01, 2023.

Tenor 14-day Notified Amount (in ₹ crore) 50,000 Total amount of offers received (in ₹ crore) 22,468 Amount accepted (in ₹ crore) 22,468 Cut off Rate (%) 6.49 Weighted Average Rate (%) 6.49 Partial Acceptance Percentage of offers received at cut off rate NA Ajit Prasad Director (Communications) Press Release: 2023-2024/1389

On a review of the current and evolving liquidity conditions, it has been decided to conduct a Variable Rate Reverse Repo auction on December 01, 2023, Friday, as under:  Sl. No. Notified Amount (₹ crore) Tenor (day) Window Timing Date of Reversal 1 50,000 14 10:30 AM to 11:00 AM December 15, 2023 (Friday) 2. The operational guidelines for the auction as given in the Reserve Bank’s Press Release 2019-2020/1947 dated February 13, 2020 will remain the same.  Ajit Prasad Director (Communications) Press Release: 2023-2024/1374

Data on sectoral deployment of bank credit for the month of September 20231 collected from 40 select scheduled commercial banks, accounting for about 93 per cent of the total non-food credit deployed by all scheduled commercial banks, are set out in Statements I and II. On a year-on-year (y-o-y) basis, non-food bank credit2 registered a growth of 15.3 per cent in September 20233 as compared with 16.9 per cent a year ago. Highlights of the sectoral deployment of bank credit3 are given below: