RBI Monetary Policy: Shaktikanta Das Announces No Change in Repo Rate; Impact on Home Loans and EMIs Explained

RBI Monetary Policy: The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) concluded its latest meeting, and the results are in. RBI Governor Shaktikanta Das announced that the repo rate remains unchanged at 6.50% for the 11th consecutive time. This decision, backed by a 4-2 majority in the MPC, highlights the central bank’s neutral policy stance amid evolving economic challenges.

What is the Repo Rate and Why Does it Matter?

The repo rate is the interest rate at which the RBI lends short-term funds to commercial banks. It plays a crucial role in controlling inflation and influencing borrowing costs. When the repo rate is unchanged, as in this case, there is minimal impact on your home loan EMIs and other loans.

Governor Shaktikanta Das emphasised the importance of price stability for sustained economic growth. The unchanged repo rate signals the RBI’s commitment to balancing inflation control with fostering economic growth.

Implications for Home Loans and EMIs

For borrowers, the RBI's decision to keep the repo rate steady at 6.50% directly affects home loan interest rates and EMIs. Since commercial banks use the repo rate as a benchmark for lending rates, an unchanged rate means that borrowers with floating-rate home loans will not see an immediate rise in their EMIs.

New borrowers looking to secure home loans might not find significant benefits either, as banks are unlikely to lower lending rates in the absence of a repo rate cut. Existing borrowers, especially those under the floating rate system, will continue paying their current EMIs without any reduction. This status quo may compel homebuyers and borrowers to reassess their financial plans as they wait for more favorable economic conditions or potential rate cuts in the future.

Key Highlights from RBI Monetary Policy

• GDP Growth Projection: The RBI revised its GDP growth forecast for FY 2024-25 from 7.2% to 6.6%, reflecting a cautious outlook amid global and domestic economic challenges.
• Inflation Outlook: Retail inflation is projected to rise slightly, from 4.5% to 4.8%, mainly due to food price pressures, with relief expected from the upcoming Rabi harvest.
• Cash Reserve Ratio (CRR): The central bank reduced the CRR from 4.5% to 4%, a move aimed at boosting liquidity in the banking system.

Governor Das emphasised that the RBI's monetary policy aims to balance price stability with economic growth. By maintaining the current repo rate, the RBI signals its intent to stabilise inflation while supporting recovery.

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