Repo Rate Unchanged

  • The monetary policy committee of the Reserve Bank of India on Dec 6 2017 decided to keep the repo rate unchanged at 6%, for the second consecutive meeting.
  • RBI did so while maintaining its neutral stance. This means banks are unlikely to revise their home or car loan rates anytime soon.
  • While observing that moderation in inflation (excluding food and fuel) observed in Q1 of 2017-18 had, ‘by and large’, ‘reversed’, the six-member committee said inflation may continue to accelerate in the near term. 
  • The RBI revised its inflation projection to the range of 4.3-4.7% for the last two quarters of the current financial year.
  • The central bank had projected an inflation range of 4.2-4.6% in the last policy meeting held in October.
  • On growth, while observing that Q2 growth for the quarter ended September was lower than that projected in its October resolution, the central bank has retained the full-year GVA growth projection at 6.7%.

About Repo Rate

  • Repo (Repurchase) rate also known as the benchmark interest rate is the rate at which the RBI lends money to the banks for a short-term (max. 90 days).
  • When the repo rate increases, borrowing from RBI becomes more expensive.
  • If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate.
  • If the repo rate is increased, banks can’t carry out their business at a profit whereas the very opposite happens when the repo rate is cut down.
  • Generally, repo rates are cut down whenever the country needs to progress in banking and economy.
  • Currently, the new RBI Governor Sri Urjit Patel has cut the previous Repo rate to 6.00% for facilitation of India’s economy.
  • In its fifth bi-monthly Monetary policy review on 6 December 2017, RBI unchanged Repo Rate and kept at 6 %.

Source:TH & Wiki

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