No change in Repo Rate.
Since February 2023, the central bank has maintained the repo rate at 6.5 %. In previous sessions conducted in April and June, nothing had changed.
From May 2022 of last year, the Reserve Bank of India began raising the repo rate in an effort to rein in the excessive level of inflation. This process of raising the rate will continue until February 2023.
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#WATCH | #RBI Governor #ShaktikantaDas says "#MonetaryPolicy Committee decided unanimously to keep the #RepoRate unchanged at 6.50%" pic.twitter.com/Jb61HtcaxM
— The Times Of India (@timesofindia) August 10, 2023
It has an immediate impact on the loan’s EMI.
After May 2022, the RBI increased the repo rate by 250 basis points, marking the first increase in nine months. It was then lifted from 4% to 6.50%.
Reverse repo rate is the rate at which the RBI pays interest to banks for holding money, whereas repo rate is the rate at which the RBI loans to banks. The loan’s EMI is decreased when the repo rate decreases, whereas it is increased when the repo rate rises.
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RBI policy comes , everyone on Twitter#RepoRate #rbipolicy pic.twitter.com/2c8Xc7gXGq
— Finance Memes (@Qid_Memez) August 10, 2023
Inflation and the relationship between the repo rate.
The Reserve Bank loans to other banks at a rate known as the repo rate. As a result, banks pay more for borrowing from the Reserve Bank when the repo rate rises. As a result, the loans that are available to regular people are likewise rising in cost.
To combat inflation, the Reserve Bank increases the repo rate, making loans more expensive. The cost of debt has decreased the economy’s cash flow.
As a result, both the demand for goods and the rate of inflation decline. There is also reverse repo rate in addition to repo rate. The Reserve Bank pays interest on deposits made by other banks at a rate known as the reverse repo rate.
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