Monetary Policy Meet June 2024: RBI Keeps Repo Rate Unchanged at 6.5%

2 Minutes Read
RBI
RBI Keeps Repo Rate Unchanged. | Image Source: X/ @RBI

Summary

RBI's Monetary Policy Committee maintains repo rate at 6.5% in June 2024, aiming to balance economic growth and inflation control.

The Monetary Policy Committee, led by RBI Governor Shaktikanta Das has decided to keep the repo rate unchanged at 6.5% on Friday (June 7, 2024).

The MPC began its three-day meeting on Wednesday (June 5, 2024), shortly after the Lok Sabha election results. The six-member committee is responsible for setting India’s benchmark interest rate, the repo rate.

During a press conference, RBI Governor Shaktikanta Das revised the GDP growth projection for FY 25 to 7.2%, up from the previously expected 7%. The government has assigned the RBI to maintain CPI inflation at 4%, with a margin of 2% on either side.

With the RBI maintaining the repo rate, all lending rates linked to this benchmark will remain unchanged. This means borrowers can now relax as their equated monthly installments (EMIs) will not go up.

Let’s see how a change in the repo rate affects loans:

Impact on Interest Rates:

Repo Rate Cut: When the RBI lowers the repo rate, commercial banks can borrow money more cheaply from the central bank.

This often leads to reduced interest rates on loans, including home loans, making homeownership more affordable as lower interest rates mean lower EMIs (Equal Monthly Installments).

Repo Rate Hike: When the RBI increases the repo rate, borrowing costs for banks go up. To maintain profitability, banks usually increase the interest rates on all of their loans including home loans.

This results in higher EMIs for existing borrowers with floating-rate loans and higher interest rates for new home loan applicants.

Impact on Existing Borrowers:

Floating Rate Loans: Borrowers with floating-rate home loans experience immediate effects from repo rate changes. Their interest rates are directly linked to the repo rate, so any change is reflected in their EMIs.

Also Read: Why has RBI fined ICICI Bank and YES Bank?

Fixed Rate Loans: Changes in the repo rate do not immediately impact borrowers with fixed-rate home loans. Their interest rate remains the same for a specific period (usually 1-5 years). However, once this fixed-rate term expires, the interest rate will reset based on the prevailing repo rate at that time.

The RBI aims to control inflation and keep it within a target range, but currently, inflation, especially for food, is above the 4% target.

While cutting rates could boost growth, the RBI is focusing on controlling inflation, believing that maintaining the current rate will help manage it while still supporting some economic growth.

Want to learn the art and science of managing your money? The 1% Club can help. DetailsĀ here

Share the Post:

Explore Money School

Popular Posts

Explore Money School

Leave a Reply

Also read other articles

This Car Insurance mistake will cost you thousands of rupees

When you make a claim for vehicle damage, the insurer will usually not reimburse the entire amount. There are a few hidden costs you must understand, read on to find out.

Why has RBI fined ICICI Bank and YES Bank?Ā 

RBI fines ICICI Bank and YES Bank for regulatory violations. Details of penalties and reasons for non-compliance disclosed.

What is Buffett Indicator? Are Indian markets overvalued as per this metric?Ā 

Having taken into account the geopolitical uncertainties and domestic growth drivers; market is still poised to rally as per the experts.

Reliance to Purchase Russian Oil in Roubles from Rosneft: Report

Reliance makes deal with Rosneft for Russian oil. The purchase of Urals crude and ESPO Blend will bring changes in the Indian market.

Over 2 Lakh People Have Taken

Control of Their Financial Freedom

Financial Independence is the superpower
that can open a whole new world
of possibilities for you.

Join The 1% Club to know how it's done

Discover more from The 1% News

Subscribe now to keep reading and get access to the full archive.

Continue reading

Subscribe Now

Subscription Form