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RBI cut interest rates on 9 April. The repo rate was reduced by 0.25% to 6%.
The common man is going to get more relief soon. From June to Deepawali next month, the repo rate from RBI is fixed by 0.50%. According to officials associated with the case, the next meeting of RBI’s Monetary Policy Committee is to be held from June 4-6.
Prior to this, the repo rate has been agreed to cut by 0.25%. After this, there can be more cuts in the meeting to be held from 5-7 August or 29 September to 1 October. This will be a gift of Deepawali in a way, because the same month is Deepawali.
Due to decrease in repo rate, home and car loans connected to it will be cheaper. The industry will start getting cheaper loans. This will not only promote urban consumption, but will also create employment by increasing investment in factories. The RBI started a repo rate cut from February. Since then, two meetings have been cut by 0.50%. Due to this, the repo rate has fallen to 6%.
RBI meets every two months
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 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 was held on 7-9 April.
Absolutely suitable for all factor rate cut SBI Securities Deputy Vice President Sunny Aggarwal said that all factor rates are absolutely suitable for the cut. Monsoon is expected to remain normal. GDP growth is stable. Inflation is under control. Retail inflation is at a lower level after July 2019.
In the last meeting, the RBI governor also indicated that if inflation remains under control, rates may decrease further. This will boost real estate and auto sector.
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.
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