Repo rate News

The three-day MPC meeting comes at a time when inflation is at an all-time low and GDP growth on a high trajectory path. 

RBI Governor Sanjay Malhotra told market guru Anil Singhvi in an exclusive interview to Zee Business that the central bank’s focus is to keep growth stable while strengthening banks, NBFCs and overall financial stability. He said India’s journey to a USD 5-trillion economy will rely on a resilient financial system and better customer experience across banking services.

The report said the broader policy stance is likely to stay prudent, with the central bank poised to become data-dependent once this step is taken.

The report said the broader policy stance is likely to stay prudent, with the central bank poised to become data-dependent once this step is taken.

If RBI doesn’t cut rates further, long-duration bondholders may suffer losses on the market value of their bonds.  

Although the current repo rate pause means no immediate EMI relief, borrowers can still take several effective steps to reduce their monthly home loan payments.

Historical data shows that a similar 25 bps cut in August 2017 resulted in an incremental credit growth of Rs 1,956 billion by Diwali, with nearly 30 percent of this in personal loans.  

While the extent of trade war pain is unclear, monetary policy may have to do the heavy lifting in India, reports have said.

Food inflation has peaked (declined from 10.9 per cent in October 2024 to 6 per cent currently) and a 25 bps cut in repo rate by the RBI and open market operations (OMO) will ease liquidity in the next 3-6 months. 

According to a Morgan Stanley report, the RBI is expected to proactively manage liquidity and take up some additional measures (OMO purchases/FX swaps) as liquidity deficit rises towards end-March.

On liquidity, the central bank has urged banks to lend in the un-collateralised call market, instead of parking that money with the RBI.

In a big relief for banks, RBI Governor Sanjay Malhotra announced that the implementation of the proposed Liquidity Coverage Ratio (LCR), as well as project financing norms, will be deferred by a year and will not be implemented before March 31, 2026. 

The RBI may also want to address the stress in the non-sovereign money market, according to a report by Emkay Global Financial Services.

The Reserve Bank of India (RBI) has kept the repo rate (short-term lending rate) unchanged at 6.5 per cent since February 2023. The last time the RBI had reduced the rate was during the Covid times (May 2020) and thereafter, it was gradually raised to 6.5 per cent. 

In a marked departure from previous years, the Budget chose to stimulate consumption and savings rather than focus only on capex. However, it continued to stay focused on fiscal consolidation. 

RBI Podcast Service: The RBI Governor announced that the CRR has been cut by 50 basis points from 4.5 per cent to 4 per cent. 

While home loan borrowers were hoping for a rate cut that would have reduced their EMIs, the RBI decided to maintain the status quo. Experts believe that a stable repo rate will keep the residential momentum going.

The Induslnd bank is now offering an interest between 3.5% to 7.50% on FDs depending on maturities of 7 days to 10 years. The new rates are implemented from August 05, 2023.

BSE Sensex is trading down 326 points after RBI policy announcement at 65,669 points.