RBI Monetary Policy Update: Repo Rate Remains Unchanged at 6.5%
The Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep the repo rate steady at 6.5% for the eighth consecutive time. This decision comes as retail inflation has dropped to an 11-month low of 4.83% in April 2024, staying within the RBI’s target range of 2-6%. Despite robust growth momentum, the RBI is maintaining a cautious stance to ensure that inflation aligns sustainably with its target.
Impact on Borrowers and Deposit Rates
With the repo rate remaining unchanged, borrowers may continue to face high interest rates on loans. Since the repo rate directly influences lending rates, existing loans will remain linked to the benchmark rate of 6.5%. However, new loans may be offered at lower spreads than older loans if there are any future rate cuts. This could lead to lower EMIs for borrowers, but fixed-interest loans will not be impacted.
On the other hand, interest rates on fixed deposits (FDs) are expected to rise as banks compete to attract more depositors. This presents an opportunity for depositors to lock in higher returns on their investments as banks offer competitive rates on FDs. Monitoring rates during this time could help depositors secure better returns on their deposits, as banks adjust their lending and deposit rates.
Expert Insights from Adhil Shetty
Adhil Shetty, CEO of Bankbazaar.com, highlights the importance of monitoring interest rates during this period. He notes that banks may offer higher interest rates on FDs to attract deposits while balancing their lending rates. This creates a favourable environment for depositors to secure better returns on their investments.
FAQ
Q: What is the repo rate set by the RBI?
A: The RBI has decided to keep the repo rate steady at 6.5%.
Q: How will borrowers be affected by the unchanged repo rate?
A: Borrowers may continue to face high interest rates on loans, with existing loans remaining linked to the benchmark rate of 6.5%.
Q: What opportunity do depositors have with rising interest rates on FDs?
A: Depositors have the opportunity to lock in higher returns on their investments as banks offer competitive rates on FDs.
Conclusion
Overall, the RBI’s decision to maintain the repo rate at 6.5% reflects its cautious approach towards inflation and economic growth. Borrowers may continue to face high interest rates on loans, but the potential for future rate cuts could lead to lower EMIs. Deposit rates are also expected to rise, offering depositors an opportunity to earn higher returns on their investments.
As the economy continues to evolve, staying informed about monetary policy updates and interest rate changes can help individuals make informed financial decisions and take advantage of opportunities in the market.
