RBI Keeps Repo Rate Unchanged at 6.50% for the Ninth Consecutive Time

Mumbai, August 8 (Read): The Reserve Bank of India (RBI) has once again prioritized controlling inflation over growth, keeping the key policy rate, the repo rate, unchanged at 6.50% for the ninth consecutive time. Loans will not become more expensive, and EMIs will not increase. The RBI last raised the repo rate by 0.25% to 6.5% in February 2023.
RBI Governor Shaktikanta Das announced this decision at a press conference following the Monetary Policy Committee (MPC) meeting held from August 6-8. Shaktikanta Das mentioned that four out of six MPC members voted to keep the repo rate unchanged at 6.50%. He explained that the decision was made to maintain inflation at a sustainable level of around 4% and to support economic growth amid global uncertainties. Das also stated that the central bank has maintained its GDP growth forecast for the current fiscal year 2024-25 at 7.2%. Additionally, the retail inflation rate estimate for the current fiscal year remains unchanged at 4.5%.
What is the Repo Rate?
The repo rate is the interest rate at which the RBI lends money to public, private, and commercial banks. A reduction in the repo rate provides relief to consumers as it leads to lower loan interest rates, while an increase in the repo rate makes loans more expensive. When the repo rate is raised, banks receive loans at higher interest rates, making loans costlier for consumers. Conversely, when the repo rate is lowered, loans become cheaper.
It is noteworthy that in June, the retail inflation rate rose to 5.08%, marking a four-month high. Similarly, the wholesale inflation rate for June stood at 3.36%, a 16-month high. Ashwani Rana, founder of Voice of Banking, commented on the RBI’s decision, stating that bank customers awaiting a reduction in the repo rate might be disappointed. However, he expressed hope that if the RBI perceives inflation to be under control, a cut in the repo rate might be considered in the next MPC meeting.