Governor of the Reserve Bank of India (RBI), Shaktikanta Das, provided details on the choices made during the bi-monthly, three-day monetary policy committee meeting. For the eighth consecutive month, the RBI left the policy rate at 6.5 percent without making any changes to the repo rate. Das stated that it was decided not to alter the repo rate at the MPC meeting. In February 2023, the central bank raised the repo rate to 6.5 percent.
The RBI voiced concern about the rising pace of inflation.
Shaktikanta Das, governor of the RBI, stated that the interest rate remained unchanged. The repo rate has remained at the previous 6.5% level. Four of the six MPC members were not in favor of changing the rates. He said that we are working towards making the Reserve Bank a model central bank in the ‘Global South’. The inflation-growth balance is moving forward favorably. RBI expressed concern over the high level of food inflation.
The repo rate does not change from February 2023 to 6.5 percent.
The RBI’s decision will not have any bearing whatsoever on your home loan’s interest rate. In other words, you will be required to make the same EMI payment as you are currently doing in the upcoming month. It was anticipated that the central bank will not alter the inflation rate despite worries about it. Since February 2023, the repo rate has stayed at 6.5 percent. The SBI Research research predicts that the inflation rate in May will be 5%; the exact numbers will be released in the second week of June. The retail inflation rate was 4.83 percent earlier in April.
Money is kept in reserve
by the central bank policy meetings 6 times a year. This was the second MPC meeting of the financial year 2024-25. In this meeting, the repo rate is reviewed by the Reserve Bank keeping in mind the inflation rate. Before taking any decision on this, RBI keeps in mind many factors like demand, supply, inflation, and credit. The next meeting of the MPC will take place in the first week of September, following June. It is unlikely that the repo rate will be lowered at the upcoming meeting either. The current inflation rate is higher than what the government has set. The Reserve Bank is tasked by the government with bringing the inflation rate down to a range of two to four percent. Experts anticipate that in the third quarter of the 2025 fiscal year, the RBI will likely lower the repo rate.
How does that affect you?
The interest rate on bank loans is impacted by changes in the repo rate set by the RBI. Following the hike in the repo rate, banks offer a wide range of loans, including home loans, auto loans, and personal loans. In simple words, banks increase the interest rate. But if RBI cuts the repo rate, then it reduces the interest rate of the loan.
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