MUMBAI: As expected by the majority, the RBI has yet again kept the repo rate unchanged at 6.5 per cent. This marks the 9th consecutive time the rate has remained steady.
The decision was taken today (Thursday) by the Monetary Policy Committee (MPC) during its third bi-monthly policy meeting for the financial year 2024-25 that commenced on Tuesday and ended today.
It was in May 2020 the RBI had last cut the repo rate,which was by 40 basis points to 4 per cent, when the Covid pandemic frightened the country as well as the whole world, denting the entire economy, and resulting in slowdown in demand, production cuts and job losses.
Since May 2020, the RBI has raised the repo rate from 4 per cent to by 250 points to 6.50 per cent through several rounds as the high inflation kept staring at the economy.
No ‘accommodation’
The six-member MPC also continued with the monetary policy stance of withdrawal of accommodation.
Four out of six MPC members voted in favour of the rate decision like what happened during the last MPC meeting too.
The governor noted that the inflation has broadly been on a declining trajectory.
The Reserve Bank of India (RBI) holds its Monetary Policy Committee (MPC) meetings typically once in every two months and these meetings are scheduled for the whole financial year in advance.
Stable inflation
RBI Governor Shaktikanta Das attributed the reason for today’s decision mainly to the stable inflation levels as a key factor in the decision.
Explaining the reasons for the decision, Das said the retail inflation increased to 5.08 per cent year-on-year in June due to increasing food prices.
“But the retail inflation has remained below 5 per cent since March and under 6 per cent since September last year,” he added.
Forex at $675bn
Das said India’s foreign exchange reserves currently stay at a record high of $675 billion and the country’s external sector is on a strong footing.
Stating that the inflation is expected to decrease gradually, he added that the RBI predicts the inflation to be 4.5 per cent for the financial year 2024-25 and 4.4 per cent for Q1 Fy26.
“The RBI expects India’s economy to grow 7.2 per cent in the FY2024-25, and the growth is expected to be steady in the coming quarters.
Quarterly GDP growth projections for the country are between 7.1 per cent and 7.4 per cent.
For common man
The interest rates will remain more or less the same for new borrowers.
For the home loans, there won’t be any noticeable change in their EMIs as mostly the rates are linked to repo rate.
The EMIs on auto loans that are linked to repo are unlikely to see any change in interest rate and hence in their EMIs.
