In its latest monetary policy decision, the Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.5% for the ninth consecutive time, bringing relief to borrowers as their equated monthly instalments (EMIs) will not increase. The decision was taken by the six-member Monetary Policy Committee (MPC), with four members voting in favour of the rate decision.
The RBI Governor, Shaktikanda Das, stated that inflation has been on a declining trajectory, justifying the decision to maintain the status quo. The repo rate has remained unchanged since May 2022, when it was hiked to 6.5% to tackle high inflation levels after the COVID-19 pandemic subsided.
While borrowers can breathe a sigh of relief, lenders may still raise interest rates on loans linked to the marginal cost of fund-based lending rate (MCLR), as the full transmission of the previous rate hikes has not been implemented. The 1-year median MCLR of banks has increased by 168 basis points between May 2022 and June 2024.
The RBI’s decision to maintain the repo rate is seen as a balanced approach to managing inflation and supporting economic growth.
