RBI Gives Relief To Borrowers By Holding A Steady Repo Rate

On Thursday, April 6, the Reserve Bank of India (RBI) stated that during its first Monetary Policy Committee meeting for the fiscal year 2023–2024, it would not alter the repo rate.

The Impact

As per India Today,the RBI had raised the repo rate by 2.50 percent in six monetary policy meetings during the previous fiscal year, increasing the cost of loans and placing a heavy weight on borrowers. This is why deciding not to change the current repo rate is critical for the public. Due to this rise, borrowers’ home loan EMIs had to be much higher.

Thus, for now, those paying interest on home loans may relax. The Reserve Bank of India (RBI) defied the majority of other central banks by pausing the repo rate increases. The current repo rate is 6.5 percent.

However, many argue that this is only a temporary respite as the RBI monitors the effects of prior rate rises. They anticipate a rate increase shortly.

The Repo Rate

The rate at which commercial banks borrow money from the Reserve Bank of India is the repo rate. (RBI). It costs more for banks to borrow money from the central bank when the RBI raises the repo rate. Naturally, the banks pass on the increased costs to people by raising loan interest rates.

Therefore, borrowing becomes more costly if the RBI raises repo rates which increase EMIs.

The RBI raises the repo rate for several reasons, including reducing inflation, supporting the currency, regulating market liquidity, and managing the balance of payments.

Since May of last year, the RBI has increased the repo rate by 250 basis points.

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