Why RBI did not increase Repo Rate this time, Let’s understand in simple language

- Advertisement -

Everyone was expecting 25 basis points increase in policy rate this time but it was a total surprise as RBI did not increase the policy rate in its MPC meeting. RBI has been constantly increasing repo rate since May 2022 but why RBI paused repo rate this time. Let’s understand this in simple language. But first let’s have a look at the policy rates and what is repo rate?

Repo Rate

Repo Rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks or financial institutions in India against government securities. If repo rate is high then consumers spend less and when repo rate is low consumers spend more. When you take a home loan from bank, bank charges you a interest rate, for example 8.5%. This interest rate is linked to Repo rate. If repo rate will increase then this interest rate will also increase and if repo rate decreases then this interest rate will also decrease. So, consumers will spend less or more accordingly.

RBI Policy Rates

Policy Repo Rate6.50%
Standing Deposit Facility Rate6.25%
Marginal Standing Facility Rate6.75%
Bank Rate6.75%
Fixed Reverse Repo Rate3.35%

RBI Last 5 year Repo Rate

DateRate
6th April 20236.50%
8th February 20236.50%
7th December 20226.25%
30 September 20225.90%
8 June 20224.90%
4 May 20224.40%
22 May 20204.00%
27 March 20204.40%
04 October 20195.15%
07 August 20195.40%
06 June 20195.75%
01 August 20186.50%
06 June 20186.25%
02 August 20176.00%

Why RBI did not increase Repo Rate?

Expert economists can currently provide of four reasons for this:

- Advertisement -
  • slowing consumption
  • less private investment
  • high interest rates leading to decrease in demand
  • it will favour the growth-inflation tradeoff
  • many global agencies lowering India’s growth forecasts for this financial year amid expectations of global economic slowdown and monetary tightening by other countries.

Growth Rate

The RBI has projected real GDP growth for 2023-24 at 6.5 per cent. This is higher than the forecast of 6.4 per cent made in the February 2023 policy. The RBI Governor said the country’s real gross domestic product (GDP) is expected to have recorded a growth of 7 per cent in 2022-23.

Inflation forecast

Assuming an annual average crude oil price (Indian basket) of $ 85 per barrel and a normal monsoon, the RBI has projected CPI inflation to be at 5.2 per cent for 2023-24, lower than the expectation of 5.3 per cent announced in the February 2023 policy.

- Advertisement -

Share this article...

Comments

1 COMMENT

  1. In my opinion the RBI need to decrease Repo rate. if market got lot of economic activity and increase the purchasing power of people.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

More News...

Latest

TCS announced double digit salary hike for employees

TCS starts variable pay for Junior Employees

Finance Ministry Proposes Strict Measures to prevent Cyber Fraud after BOB World Scam

Finance Ministry Proposes Strict Measures to prevent Cyber Fraud after BOB World Scam

CA in Pune cheated of Rs 3.4 crore in Share Trading Fraud

Pune-based Chartered Accountant Cheated of Rs 3.4 Crore in Elaborate Share Trading Cyber Fraud

BJP promises to increase Mudra Loan Limit to Rs.20 Lakh

BJP promises to increase Mudra Loan Limit to Rs.20 Lakh

RBI to Introduce New Licensing Framework for Point of Sales (POS) Operators in India

RBI to Introduce New Licensing Framework for Point of Sales (POS) Operators in India

This Man never went to College but now Earns Rs.10 Crore, Read his success story

This Man never went to College but now Earns Rs.10 Crore, Read his success story

Banks can not force Lawyers to pay Court Fees from their own pockets

Banks can not force Lawyers to pay Court Fees from their own pockets

Last 10 years Inflation Rate in India

Last 10 years Inflation Rate in India

1.5 crore individuals have not filed ITR, IT Department will soon send notice to them

Income Tax Department to send notice to 1.5 crore individuals for not filing ITR

Viral Video of Girl changing Clothes openly in front of Public

Viral Video of Girl changing Clothes openly in front of Public

Latest News