Mumbai2 minutes ago
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In the new financial year, the Reserve Bank’s first Monetary Policy Committee meeting is starting tomorrow i.e. on Monday 7 April. This meeting estimates a reduction of 0.25% in the repo rate. That is, loans may be cheap in the coming days.
On April 10, at 10 am, RBI Governor Sanjay Malhotra will give information about the decisions taken in this meeting. The Monetary Policy Committee consists of 6 members. Of these, 3 are of RBI, while the rest are appointed by the central government.
The RBI meeting usually takes place every two months. Recently, the Reserve Bank had issued a schedule for the meetings of the Monetary Policy Committee of FY 2025-26. There will be a total of 6 meetings in this financial year. The first meeting is being held on 7-9 April.
In February this year, RBI cut the repo rate by 0.25%.
In February, the interest rate was deducted earlier in the last fiscal year i.e. the last meeting of 2024-25, RBI had cut interest rates by 0.25%. The meeting held in February reduced the interest rates from 6.5% to 6.25%. This deduction was done after about 5 years.
What will be the change due to decrease in repo rate?
After decreasing the repo rate, banks can also reduce their interest rates on loans like housing and auto. All your loans can be cheap and EMI will also decrease. If the interest rates are low, housing demand will increase. More people will be able to invest in real estate.
What is the repo rate, how is the loan cheaper?
The interest rate at which RBI gives loan to banks is called repo rate. Due to low repo rate, the bank will get a loan at low interest. If the loans of banks are cheaper, then they often pass the benefit to the customers. That is, banks also reduce their interest rates.
Why does the Reserve Bank increase and reduce the repo rate?
Any Central Bank has a powerful tool to fight inflation as a policy rate. When inflation is very high, the Central Bank tries to reduce money flow in the economy by increasing the policy rate.
If the policy rate is high, then the loan from the Central Bank to the banks will be expensive. In return, banks make loans expensive for their customers. This reduces money flow in the economy. If the money flow is low, there is a decrease in demand and inflation decreases.
Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such a situation, the Central Bank reduces the policy rate. This makes banks cheaper from central bank and customers also get loans at a cheaper rate.
