Repo Rate Steady for 8th Time: What it Means for You

Repo Rate Steady for 8th Time: What it Means for You

New Delhi. Reserve Bank of India Governor Shaktikanta Das on Friday announced no change in the repo rate at 6.5 percent as retail inflation continues to be above its target of 4 percent. This is the eighth consecutive time when the repo rate will remain at 6.5 percent without any change. 

It is worth noting that the statement from the RBI governor has come when retail inflation continues to be above its target at 4 percent amidst a backdrop of economic uncertainties. 

What happens when the Repo rate remains unchanged?

It is an interest on which the Reserve Bank of India gives loans to other commercial banks. No change means that banks taking loans from RBI will continue to get loans at the same rate as they were getting earlier. The repo rate is used by the monetary authorities to control inflation. 

If the repo rate stays the same, the EMIs won't alter either. As a result, the general people won't get burdened and most operations will carry on as normal. Meanwhile, it is worth noting that the repo rate plays an important role in determining the interest rates for home loans. The fluctuations impact the demand for real estate, which means if the interest rates are low, it usually boosts demand for making borrowing affordable, conversely, a high rate of interest may reduce the demand.

How general public impacted by a change in the repo rate?

A change in repo rate means, that if the repo rate increases then the loan will be expensive. If loans become expensive then people will reduce their expenditure. In such a situation, cash flow reduces and the stock market also starts falling. The result is that inflation also increases. In such a situation, when RBI has to increase the cash flow, it reduces the repo rate so that the cash flow increases and people can spend heavily.

What RBI Governor Said?

RBI Governor Shaktikanta Das said, 'The real GDP growth for the current financial year 2024-25 is 7.2 percent. It is estimated to be 7.3 percent in the first quarter, 7.2 percent in the second, 7.3 percent in the third, and 7.2 percent in the fourth.

In this way, the risk has been balanced.' He also informed that the Monetary Policy Committee has decided with a majority of 4:2 that the repo rate will not be changed and it will remain at 6.5 percent.

It should be noted that when the Reserve Bank of India (RBI) keeps the repo rate unchanged, it means that they are maintaining the same rate at which they lend money to commercial banks. This decision could be influenced by various factors such as economic conditions, inflation, and monetary policy goals.

Typically, when the repo rate remains unchanged, it signals stability in the central bank's stance on monetary policy.


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