RBI took this decision on repo rate, announcement made by Governor Sanjay Malhotra
A review meeting of the monetary committee was held under the chairmanship of Reserve Bank of India (RBI) Governor Sanjay Malhotra.
After this meeting, the Reserve Bank has not made any change in the repo rate.
Governor Sanjay Malhotra said, "The Monetary Policy Committee (MPC) met on 4, 5 and 6 August. In this meeting, the policy repo rate was discussed and decided."
MPC meeting was held amid the ongoing rising uncertainties around trade tariffs triggered by US President Donald Trump as well as moderation in headline inflation.
Governor Sanjay Malhotra said, "After a detailed assessment of macroeconomic and financial developments and possibilities, it was unanimously decided to keep the policy repo rate unchanged at 5.5 percent."
The repo rate is the rate at which RBI gives loans to banks. The interest rate the RBI pays commercial banks when they park their excess cash is called the reverse repo rate.
Increase and decrease in repo rate affects loans
The increase and decrease in repo rate affects other loans including home loans and personal loans. When the RBI wants to encourage economic activity in the economy, it reduces the repo rate to enable commercial banks to bring down the interest rates they charge (on their loans) as well as the interest rate they pay on deposits. This, in turn, incentivises people to spend money.
GDP growth forecast at 6.5 per cent
With this in mind, the RBI retained the GDP growth forecast for the current fiscal year at 6.5 per cent with risk evenly balanced. Geopolitical tensions pose challenges, Governor Malhotra added.
FY26 CPI inflation forecast lowered to 3.1%
The RBI lowered the forecast for consumer price index (CPI) inflation for FY26 to 3.1 per cent compared to the earlier projection of 3.7 per cent. The governor said that the inflation outlook has become more benign.