RBI Credit Policy:Retail inflation estimate for FY25 raised to 4.8% from 4.5%

Inflation reached 14-month high in October

In October, India’s retail inflation hit a 14-month high of 6.21 percent year-on-year. This increase was mainly driven by food inflation. Which reached the highest level of 15 months at 10.9 percent on year-on-year basis. In the food category, vegetable prices also witnessed a sharp rise. It reached a 57-month high of 42 percent year-on-year. Whereas tomatoes increased by 161 percent. There was an increase of 65 percent in potato and 52 percent increase in onion.

RBI’s focus on food inflation

This week, senior leaders including Chief Economic Advisor (CEA) V Ananth Nageswaran, Commerce Minister Piyush Goyal and Finance Minister Nirmala Sitharaman have called for reducing borrowing costs to support businesses. However, the Reserve Bank of India (RBI) has focused on food inflation as an important factor in its monetary policy decisions. The CE has suggested keeping food prices out of the inflation basket. The argument is that central banks cannot control such variables. However, RBI has not yet given any response to this proposal.

CRR for banks reduced from 4.5% to 4%

RBI Governor announced the policy to reduce CRR for banks from 4.5% to 4%. He said that now in the MPC meeting, the Cash Reserve Ratio (CRR) has been reduced by 0.50 percent. This will bring additional cash of Rs 1.16 lakh crore into the system.

Farmer loan limit increased to Rs 2 lakh

RBI Governor Shaktikanta Das said that the limit of collateral free loan for farmers has been increased. RBI has increased the farmer collateral free loan limit to Rs 2 lakh. This type of farmer loan limit has increased to Rs 2 lakh per borrower.