The Reserve Bank of India (RBI) has kept interest rates unchanged for the 11th time. The central bank has kept interest rates unchanged at 6.5%. Meaning loans will not be expensive. Your EMI will also not increase. The RBI last raised rates by 0.25% to 6.5% in February 2023.
The meeting of the Monetary Policy Committee (MPC) was going on on 4 December. RBI Governor Shaktikanta Das gave information about the decisions taken in this regard today. The RBI had earlier kept interest rates unchanged in its October meeting.
Interest rates were increased by 1.10 in 5 times
Let me tell you, there are 6 members in the MPC. Three of them are central bank governor Shaktikanta Das, deputy governor Michael Patra, executive director Rajiv Ranjan.
On October 1, the government appointed three new external members, including Ram Singh, Saugata Bhattacharya and Nagesh Kumar, in the committee.
Since 2020, the Reserve Bank has raised interest rates by 1.10% in 5 times. The Reserve Bank of India (RBI) cut interest rates by 0.40% twice during Corona. In the next 10 meetings, the central bank raised interest rates 5 times. It wasn't changed four times.
Once cut by 0.50% in August 2022. The repo rate was at 5.15% on February 6, 2020, before the Corona transition period.
The policy rate is a tool used to combat inflation
An effective instrument for any central bank to combat inflation is the policy rate. When inflation is excessively high, the central bank attempts to decrease the money supply in the economy by increasing the policy rate.
When policy rates rise, loans become more costly
When the policy rate is elevated, loans provided to banks by the RBI become costly. Consequently, banks increase the cost of loans for customers. This leads to a decrease in money circulation within the economy, thereby lowering demand and curbing inflation.
What advantage does reducing the policy rate offer
Likewise, during an economic downturn, it is necessary to boost the money supply for recovery. In such scenarios, the central bank lowers the policy rate, making loans from the RBI more affordable for banks. Consequently, customers also benefit from lower loan rates.