The Reserve Bank of India (RBI) has once again not made any change in the repo rate. The RBI last raised the repo rate to 6.5 percent in February 2023. Since then the repo rate has remained at 6.5 percent. This decision has been taken in the Monetary Policy Committee meeting (MPC) chaired by RBI Governor Shaktikanta Das. The MPC meeting was held from 5 to 7 June 2024. After which Shaktikanta Das announced the decisions of the meeting today.
The Reserve Bank has projected the growth rate to be 7.2 percent and the inflation rate to be 4.5 percent in the current financial year 2024-25. The Reserve Bank's target level for inflation is four percent (plus, minus two percent).
Shaktikanta Das said that no change has been made in the repo rate with 6.5 percent. Along with this, the Standing Deposit Facility (SDF) rate will remain at 6.25 percent and the Marginal Standing Facility (MSF) rate and the bank rate will remain at 6.75 percent. Das further said that fuel prices are seeing a decline. However, food inflation remains at a high level. He said that the prices of food items are rising. Food items will continue to be expensive like this in the future as well. Whereas, the MPC has controlled inflation so far without harming growth. He said that to prevent inflation from rising further, the MPC has decided to keep the repo rate at 6.50 percent in the meeting.
GDP growth and inflation estimate
RBI has projected the retail inflation rate (CPI) to remain at 4.5 percent during inflation in the financial year 2024-25. Retail inflation is estimated to be 4.9 percent in the first quarter, 3.8 percent in the second quarter, 4.6 percent in the third quarter and 4.5 percent in the fourth quarter. At the same time, RBI has increased the estimate of GDP growth from 7 percent to 7.2 percent in the current financial year. Das said that it is estimated to be 7.3 percent in the first quarter, 7.2 percent in the second quarter, 7.3 percent in the third quarter and 7.2 percent in the fourth quarter.
What is repo rate?
In simple language, repo rate is the rate at which the Reserve Bank gives loans to government and private banks. Just as we need loans, banks also need loans. The interest that banks pay on that loan is called repo rate. If the repo rate is low, then banks will get cheaper loans. That is, banks will give cheaper loans to their customers. On the other hand, if the repo rate is high, then the loan will be expensive.