𝐂𝐲𝐜𝐥𝐨𝐧𝐞 𝐁𝐢𝐩𝐚𝐫𝐣𝐨𝐲'𝐬 𝐃𝐞𝐯𝐚𝐬𝐭𝐚𝐭𝐢𝐧𝐠 𝐈𝐦𝐩𝐚𝐜𝐭: 𝟖𝟎𝟎 𝐔𝐩𝐫𝐨𝐨𝐭𝐞𝐝 𝐓𝐫𝐞𝐞𝐬, 𝟓𝟎𝟎 𝐇𝐨𝐮𝐬𝐞𝐬 𝐃𝐚𝐦𝐚𝐠𝐞𝐝, 𝐚𝐧𝐝 𝟐𝟑 𝐈𝐧𝐣𝐮𝐫𝐞𝐝

What is the Repo Rate?

The Repo Rate is the rate at which the Reserve Bank of India (RBI) lends money to banks, while the Reverse Repo Rate is the rate at which banks earn interest on keeping money with the RBI. A decrease in the Repo Rate leads to a reduction in the EMI (Equated Monthly Installment) of loans, while an increase in the Repo Rate results in an increase in the EMI.

The Reserve Bank of India (RBI) has announced the results of its three-day Monetary Policy Committee (MPC) meeting. Governor Shaktikanta Das of the Reserve Bank informed that the policy rates, including the Repo Rate, have been kept unchanged in the second meeting of the financial year 2023-24. Similarly, no changes were made to the Repo Rate in the previous meeting held in April. This means that the Repo Rate will remain at 6.5%, and borrowers will not face an additional burden in terms of EMIs.

The meeting started on June 6th:

The decision regarding the outcome of the MPC meeting of the Reserve Bank of India (RBI) was announced today by Governor Shaktikanta Das. He stated that there have been no changes made to the Repo Rate this time as well. It is worth mentioning that since May 2022, the Reserve Bank has been continuously increasing the Repo Rate one after another to control the rising inflation that reached its highest level.

The repo rate has increased significantly since May 2022:

The RBI has increased the Repo Rate by 250 basis points from May 2022 to February 2023, which means that the current Repo Rate stands at 6.5%. The Repo Rate is the rate at which the RBI lends money to banks, while the Reverse Repo Rate is the rate at which banks earn interest on keeping money with the RBI. A decrease in the Repo Rate leads to a reduction in loan EMIs, while an increase in the Repo Rate results in an increase in EMIs.

Governor Shaktikanta Das of the RBI stated that it is a relief that the Indian economy is strong and resilient. However, it is also evident that the global economy has not completely normalized, but domestic macroeconomic fundamentals are strengthening. Therefore, all the members of the MPC unanimously decided not to make any changes to the policy interest rates in this meeting.

The estimated inflation rate to remain above 4%:

Governor Shaktikanta Das of the RBI mentioned that the Consumer Price Index (CPI) inflation is still above our 4% target and is expected to remain above it in 2023-24 as per our previous estimates. He also projected a GDP growth rate of 6.5% for the fiscal year 2023-24. He stated that the real GDP growth rate could be 8% in the first quarter of FY24, while the estimate for the fourth quarter is 5.7%. Both urban and rural demand have strengthened. Das further stated that the Standing Deposit Facility rate is 6.25%, and the Marginal Standing Facility and Bank Rates are at 6.75%.

The inflation rate in the country:

In April 2023, the retail inflation rate decreased to 4.7%, reaching its lowest level in 18 months. The retail inflation rate in April was the lowest since October 2021. On the other hand, India's Wholesale Price Index (WPI) inflation decreased to -0.92% in April this year, compared to 1.34% in March. Food inflation based on the Wholesale Price Index decreased to 0.17% in April, which was 2.32% in March.

RBI Governor Says, "Policy on the Right Track"

While announcing the MPC results, Shaktikanta Das further mentioned that in the past three years, we have faced significant challenges, but now the policy is on the right track. We have been successful in reducing inflation. According to the RBI, the country's foreign exchange reserves stood at INR 595.1 billion as of June 2, 2023.