No Increase in EMIs This Month as RBI Keeps Repo Rate Unchanged

Governor Shaktikanta Das announced the decision to maintain the Reserve Bank of India's (RBI) key benchmark interest rate, or repo rate, at 6.5 per cent on Thursday following a two-day monetary policy (MPC) meeting.

According to RBI Governor Shaktikanta Das on Thursday, five out of the six members of the MPC opted to continue focusing on the withdrawal of accommodation to ensure inflation complies with objective while focusing on growth. After six straight policies of rate increases, the central bank's Monetary Policy Committee chose to halt.

As a result, the RBI has decided to maintain the bank rates at 6.75 percent as well as the marginal standing facility (MSF) and standing deposit facility (SDF) at 6.25 percent each. The Monetary Policy Committee (MPC), led by Shaktikanta Das, held its three-day meeting on April 3, April 5, and April 6 in the midst of the rate hike frenzy that began in May of last year to combat inflation.

The RBI made the decision to increase the repo rate by 25 basis points to 6.5 percent at its most recent MPC meeting in early February in order to control inflation. Since May 2022, the RBI has increased the repo rate—the interest rate at which it loans to banks—by a total of 250 basis points.

A weapon of monetary policy that normally works to reduce demand in the economy and lower inflation is raising interest rates. Since January, inflation has been above the Reserve Bank of India's tolerance level of 6% for two consecutive months. Retail inflation in India was 6.44 percent in February compared to 6.52 percent in January.

Core inflation, the non-food and non-fuel component, remained above 6% for the fourth consecutive month, raising anticipation that the RBI will raise interest rates by another 25 basis points in its upcoming policy review in April.

In a given year, the central bank evaluates its monetary policy six times bimonthly. Also, there are out-of-cycle reviews, where the central bank holds extra sessions in urgent situations. The first bimonthly monetary policy announcement from the RBI for Fiscal Year 24 was made today.

RBI raises the repo rate in an effort to reduce economic inflation. This increases the cost of borrowing for firms and industries, which in turn slows down investment and the flow of money into the economy.

It eventually has a negative impact on economic expansion, which aids in keeping inflation under control. In response to the uncertainty in the global economic environment, the apex industry organization ASSOCHAM advised the Monetary Policy Committee (MPC) of the central bank to prevent further increases in lending rates.

ASSOCHAM President Ajay Singh stated that the economy has reached a saturation point beyond which it may be difficult to absorb any further rate increases. "There are suggestions in some quarters about another 25 bps (basis points) increase in the repo rate by the RBI Monetary Policy Committee," Singh added.

According to the new president, "Rate-sensitive industries like real estate, including residential complexes, passenger cars, and commercial vehicles may experience the detrimental effects of the rate hike."