The Reserve Bank of India (RBI) on Thursday kept the policy repo rate unchanged for the sixth straight time as it remained firm in aligning inflation to the medium-term target of 4 per cent on a durable basis.

But the decision wasn’t unanimous: J.R. Varma voted for a 25 basis point cut, breaking ranks with his peers in the monetary policy committee (MPC) for the first time this fiscal.

The policymakers also voted to continue with its stance on the withdrawal of accommodation.

Once again, Varma voted for a change in stance to neutral – a stance that the RBI abandoned in June 2019. Varma had expressed his reservations on the withdrawal of accommodation stance at the December meet also without explicitly advocating a change of stance which he has now done.

Contrary to expectations, the RBI stuck to its conservative growth estimate for this fiscal at 7 per cent — ignoring the NSO forecast of 7.3 per cent in its advance GDP forecast put out in early January.

The policymakers also stuck to a CPI inflation forecast of 5.4 per cent this fiscal; inflation is forecast to fall to 4.5 per cent by March 2025.

RBI governor Shaktikanta Das said the inflation trajectory would be determined by the outlook on food inflation.

Das told the media the RBI will continue with its endeavour to achieve the medium-term target of 4 per cent on a durable basis even as CPI inflation is moderating with intermittent interruptions and spikes.

He said the repo rate was kept unchanged because the previous hikes in the repo rate — an increase of 250 basis points between May 2022 and February 2023 — are still working through the system.

Loan clarity

Das said all lenders will have to provide Key Fact Statement (KFS) about the terms of the loan agreement. KFS is specifically mandated for loans to individual borrowers, digital lending by RBI-regulated entities (REs) and microfinance loans.

"Now, it has been decided to mandate KFS to the borrowers for all retail and MSME loans," the governor said.

e-rupee offline

Digital rupee users will soon be able to execute transactions in areas with limited internet connectivity as the RBI announced offline capability will be introduced on the Central Bank digital currency (CBDC) pilot project.