Srinagar, Aug 8: The Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5% in its August 2024 meeting.
Without
price stability high growth cannot be sustained, the Reserve Bank of India Governor said, while making the announcement.
We have decided to focus on price stability mainly to support growth, he added.
In a situation where the GDP is holding up, we have decided to focus on inflation and ensure price stability, mainly to support growth, he said.
He also highlighted demographic shifts, climate change, geopolitical tensions and fragmentations, rising public debt and new technologies such as artificial intelligence posing a new set of challenges for the country’s economic system.
Ziraat Times here analyses what would this mean for the country’s bank interest rarws, business and household borrowers and the overall cost of living of the citizens:
Bank Interest Rates for Borrowers
Since the repo rate, which is the rate at which the RBI lends to commercial banks, remains unchanged, commercial banks are likely to keep their lending rates stable. This means businesses seeking loans for expansion, capital expenditure, or other purposes will not face an increase in borrowing costs.
Investment Decisions:
With stable interest rates, businesses can plan their investments and growth strategies without the concern of rising financing costs. This stability can encourage businesses to proceed with planned projects, supporting economic growth.
2. Household Borrowers:
For households, an unchanged repo rate means that interest rates on home loans, personal loans, and car loans are likely to remain stable. Borrowers with existing loans tied to the repo rate will see no change in their EMIs (Equated Monthly Installments).
Savings and Fixed Deposits:
On the flip side, interest rates on savings accounts and fixed deposits are also likely to remain stable. While this is good for borrowers, it means that savers won’t see an increase in returns on their deposits.
Cost of living for common people: what inflation get any better?
1.Inflation Control:
By maintaining the repo rate, the RBI aims to keep inflation in check. Stable interest rates can help prevent excessive borrowing and spending, which can contribute to inflation. This stability in the repo rate indicates that the RBI is confident about the current inflation trends and does not see an immediate need to tighten monetary policy.
Cost of goods and services:
If inflation remains under control, the prices of essential goods and services should not rise sharply. This is crucial for the common people, as stable prices help maintain their purchasing power and manage household budgets effectively.
Employment and income:
When businesses are confident about stable borrowing costs, they are more likely to invest in expansion and hiring. This can lead to job creation and income stability for the common people, contributing positively to their cost of living.
