“RBI keeps repo rate unchanged at 6.5% for the third time.”
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The RBI has decided to keep the repo rate unchanged at 6.5% for the third consecutive time. This means that the interest rate at which banks borrow money from the RBI will remain the same. This is good news for borrowers, as their home loans and other EMIs will not increase in the near future. The RBI has also maintained its stance to mitigate inflationary risks, as the CPI inflation has eased slightly from 5.2% to 5.1%. The RBI has also kept its GDP growth forecast unchanged at 6.5%, indicating that the economy is recovering from the pandemic shock. The RBI governor Shakti Kanta Das said that the Indian financial sector has been stable and resilient and that the RBI will continue to support the growth momentum with its accommodative policy.
In its latest monetary policy meeting, the RBI kept the repo rate unchanged at 6.5%. The repo rate is the interest rate at which banks take short-term loans from the RBI. By keeping the repo rate unchanged, the RBI has ensured that borrowing costs for banks and customers will not increase. This will help boost the demand for home loans and other loans, as EMIs will not rise. The RBI has also reduced its inflation forecast from 5.2% to 5.1%, as inflation has started showing signs of easing. The RBI has also retained its GDP growth projection at 6.5%, as the economy is showing signs of recovery from the COVID-19 impact. The RBI governor Shaktikanta Das said that the RBI will maintain its accommodative stance to support the economic revival.
The RBI has announced its monetary policy decision today, and it has kept the repo rate unchanged at 6.5%. The repo rate is the rate at which banks lend money to each other overnight. By keeping the repo rate unchanged, the RBI has ensured that there will be no change in the interest rates of home loans and other loans, as EMIs will remain the same. This will help stimulate the demand for loans, as borrowing will remain affordable. The RBI has also lowered its inflation estimate from 5.2% to 5.1%, as inflation has moderated slightly. The RBI has also maintained its GDP growth estimate at 6.5%, as the economy is on a recovery path after the COVID-19 shock. The RBI governor Shakti Kanta Das said that the RBI will keep its policy stance accommodative to support the growth momentum.
What is the impact of the repo rate on the economy?
What is the impact of the repo rate on the economy?
The repo rate is the interest rate at which commercial banks take short-term loans from central banks. An increase in the repo rate intends to raise lending rates, limit the money supply, and control inflation. At the same time, decreasing it can help boost economic activities, encourage borrowing, and expand the economy. The repo rate set by the Reserve Bank is also the external benchmark, on the basis of which all the government and private banks of the country decide the interest rates of their loans.
The loan linked to this rate is called the Repo Linked Lending Rate (RLLR), in which banks fix interest rates for retail loans by adding some of their internal expenses. The change in the repo rate has a direct impact on the income of banks, their functioning, deposit credit, and margins. Along with this, the effect of the change in repo rate is also seen in the shares of banks trading on the stock exchange. Due to the reduction or increase in the repo rate, there is volatility in the bank shares. Along with this, the interest rates of auto and home loans also change due to cheap or expensive loans, which directly affect the shares of companies related to them. Changes in the repo rate also affect the companies manufacturing, selling, and supplying consumer goods in the country.
Its direct impact is visible on almost all companies in the basic sector including automobile sector companies, real estate companies, NBFCs, cement, and steel. About two hundred companies in the sector are associated with the real estate sector. The effect of the change in repo rate is visible in all these companies.
Benefits of repo RBI Policy.
- Raising the repo rate intends to raise lending rates, limit the money supply, and control inflation.
- Decreasing the repo rate can help boost economic activities, encourage borrowing, and expand the economy.
- The repo rate is an effective tool for the banking regulator to control inflation. In case of high inflation, the RBI increases the repo rate to discourage banks from borrowing. This eventually reduces the liquidity in the economy, subsequently taming the high inflation.
The recent RBI policy has kept the repo rate unchanged at 6.5% for the third time in a row. This means that borrowing costs for banks and customers will not increase, which will help boost the demand for home loans and other loans, as EMIs will remain affordable. The RBI has also lowered its inflation estimate from 5.2% to 5.1%, as inflation has moderated slightly. The RBI has also maintained its GDP growth estimate at 6.5%, as the economy is on a recovery path after the COVID-19 shock. The RBI governor Shaktikanta Das said that the RBI will keep its policy stance accommodative to support the growth momentum.