The Monetary Policy Committee (MPC) of the Reserve Bank of India has decided not to make any changes in the financial year 2023-24, i.e. it will remain constant at 6.5 per cent, and the burden on EMI payers will not increase. We have talked to finance expert Bhanu Pathak about this decision of RBI. Let us tell you why this decision is so special for you.
What Is Repo Rate?
The repo rate is at which RBI lends to banks, while the reverse repo rate is at which RBI lends money to banks. A decrease in the repo rate reduces the EMI of the loan, while an increase in the repo rate results in an increase in the EMI. This decision is special for you because-
Impact On EMI and Home Loan
If there is no change in the repo rate, interest rates on home and other loans may remain constant. In this inflation era, its direct effect will also be seen in selling affordable houses. This can be a good decision for middle-class individuals who have taken or are planning to take a loan, as it means that their Equated Monthly Installment (EMI) will not increase immediately.
According to finance expert and influencer Bhanu Pathak, it has become difficult for the low or middle-income group to buy a house due to the continuous increase in the repo rate. Still, this decision of the Reserve Bank of India will remove the concern of the customers’ rising EMI, increasing the real estate. The sector will also get relief.
Borrowing Cost
For middle-class Indians who depend on loans for various purposes such as education, vehicles, or personal needs, the cost of borrowing will not increase significantly. This can make it easier for them to use credit cards and manage their finances.
Fixed Deposit Rate
MPC (Monetary Policy Committee) decided to keep the policy repo rate unchanged at 6.5%: RBI Governor Shaktikanta Das pic.twitter.com/Se8GDvCvPy
— ANI (@ANI) June 8, 2023
The repo rate also affects the interest rate offered by the bank. When the repo rate remains constant, FD rates may not increase much. While this decision may disappoint those looking for higher returns on their savings, it also means that existing FD holders will not experience a sudden drop in interest income.
Inflation Will Be Controlled
This decision of RBI can be seen as an attempt to control inflation. The central bank aims to balance economic growth while controlling inflation by keeping interest rates constant. This is beneficial for the common middle-class Indian as it helps maintain the purchasing power of their income and keeps the cost of living stable.
Economics Stability
A stable repo rate also reflects the central bank’s confidence in the economic situation. Economic stability is generally positive for the middle class, supporting job security, income growth, and business stability.
