6 Apr 2023

No Increase In Repo Rate, Your EMI Will Not Increase At Present, Relief From RBI

Mumbai: The Reserve Bank of India (RBI) has decided not to increase the repo rate. That is, the interest rate will be only 6.50 percent. Earlier, RBI had increased the repo rate for the last six consecutive times. 

Monitoring policy meetings are held every two months. The first meeting of the financial year 2022-23 was held in April-2022. RBI then kept the repo rate constant at 4%. 

Repo rate was changed six times in a row

However, on May 2 and 3, 2022, the RBI called an emergency meeting and increased the repo rate by 0.40% to 4.40%. This change in repo rate had happened after 22 May 2020. 

After this, in the meeting held on June 6-8 2022, the repo rate was increased by 0.50 percent from 4.40% to 4.90%. Then in August 2022 it was increased by 0.50% to 5.40%. In September 2022, the interest rates increased to 5.90%. Then in December 2022 the interest rate went up to 6.25%. 

Repo rate was increased last month

After this, the last monetary policy meeting for the financial year 2022-23 was held in February 2023, in which interest rates were increased from 6.25% to 6.50%.

Why no change in repo rate

RBI wants to maintain the ongoing recovery in the economy. RBI Governor said that we have not changed the policy rate to maintain the ongoing recovery in the economy, but will take steps according to the situation if needed. India's economy is strong amidst all the global tensions.

What will happen with this decision, the loan will not be expensive. EMI will remain same as before. RBI has a powerful tool to fight inflation in the form of repo rate. When inflation is very high, the RBI tries to reduce the flow of money into the economy by raising the repo rate. If the repo rate remains high, then the loan that banks get from RBI will become expensive. 

Banks, in turn, would make loans more expensive for their customers. This will reduce the flow of money in the economy. If the flow of money is less then demand will decrease and inflation will decrease. Similarly when the economy goes through a bad phase, there is a need to increase the flow of money for recovery. In such a situation, RBI reduces the repo rate.

No comments:

Post a Comment