The Reserve Bank has announced the results of the three-day Monetary Policy Committee meeting. RBI Governor Shaktikanta Das announced that the interest rates have been kept steady for the second consecutive meeting. The repo rate kept unchanged at 6.5 percent this time too. Thus, it is a matter of relief for you, if you have taken a home loan or are going to take a car loan soon. The 43rd meeting of the six-member Monetary Policy Committee of the Reserve Bank of India (RBI) began on 6 June 2023.
Let us tell you that the Reserve Bank has been increasing the repo rate continuously since May last year. Only the MPC meeting held in April did not increase interest rates. All types of loans have become expensive due to the increase in repo rate by the Reserve Bank. Its worst impact has been on the EMI of home loan borrowers. This is the reason why borrowers were expecting a way out from RBI. At the same time, those who invested money in the stock market were also waiting for this announcement.
Last year, amidst the rising prices of crude oil, the Reserve Bank suddenly started changing the repo rate after a break of about 2 years. Since then, in the last one year, loans in the country are continuously getting costlier. To control inflation, RBI had increased the repo rate by 2.5 percent between May 2022 and February 2023. The increased rapo rate has been affected home and car loans. Till last year, the home loan and car loan available around 7 percent reached double digits. At the same time, personal loan EMI is continuously increasing. However, the common people have also benefited in the form of rising rates of fixed deposits.
What is the effect of repo rate on common man
When loans are available to banks at low interest rates i.e. repo rate is low, then they can also give cheap loans to their customers. And if the Reserve Bank increases the repo rate, it will become costlier for banks to take loans and they will make loans costlier for their customers. In simple words, when banks give us loans and we have to pay interest on that loan. Similarly, banks also require huge amount of money for their day-to-day operations and they take loan from Reserve Bank of India (RBI). The rate at which the Reserve Bank charges interest on this loan is called the repo rate.