The Reserve Bank of India has decided to maintain the short-term lending rate, or repo rate, at 6.5 per cent after its latest Monetary Policy Committee (MPC) meeting. The decision is in line with analysts' expectations, as the central bank remains cautious in its approach towards rate adjustments. In addition, the MPC has also projected a retail inflation rate of 4.5 per cent for fiscal 2024-25, while emphasizing on the need to maintain stability in interest rates for borrowers. As Indian benchmark indices continue to trade in the red, experts believe that this decision will provide much-needed assurance and confidence to the real estate market. Here's a summary of the latest developments from RBI's MPC meet.
Reserve Bank of India's Monetary Policy and Its Impact
The Reserve Bank of India (RBI) is the central bank of India. It is responsible for regulating the country's monetary policy, which aims to manage inflation, stabilize the financial system, and promote economic growth.
Repurchase Agreement (Repo Rate)
The repo rate is the interest rate at which the RBI lends money to commercial banks in the form of repurchase agreements. When banks need to borrow money, they can sell government securities to the RBI and agree to buy them back at a higher price on a specific date. The difference between the sale price and the repurchase price represents the interest charged by the RBI.
Monetary Policy Committee (MPC)
The MPC is a six-member body within the RBI that is responsible for setting the repo rate. The MPC meets once every two months to discuss the economic outlook and decide on the appropriate level of the repo rate.
Recent Monetary Policy Decision
In its latest MPC meeting, the RBI decided to maintain the repo rate at 6.5%. This decision was in line with analysts' expectations and reflects the central bank's cautious approach towards rate adjustments. The MPC also projected a retail inflation rate of 4.5% for fiscal 2024-25.
Impact on the Indian Economy
The RBI's decision to maintain the repo rate is expected to provide stability to the Indian economy. A stable interest rate environment encourages investment and economic growth. The decision is also seen as positive for the real estate sector, as it will reduce the cost of borrowing for homebuyers.
Top 5 FAQs Related to Monetary Policy
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