The meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will end tomorrow. On the last day of this three-day meeting on April 9 at 10 am, RBI Governor Sanjay Malhotra will announce the decisions taken in the meeting. It is believed that RBI can cut the repo rate this time too. Earlier in February, the RBI to Announce Repo Rate Cut after a long gap of five years.
No concern about inflation
Experts believe that the repo rate may be cut by 25 basis points, as there is no major concern on the inflation front at the moment. The Reserve Bank may give some additional relief on the repo rate to stimulate growth. They say that the challenge for the global economy has increased due to Donald Trump’s tariffs; in view of this, immediate steps need to be taken to stimulate growth in India.
The rating agency also expects
Rating agency ICRA also expects the MPC to cut policy interest rates by 25 basis points while maintaining a neutral stance. In the last meeting led by RBI Governor Sanjay Malhotra, the repo rate was cut by 0.25%, and after that, the rate became 6.25%. This cut was done after a long wait of about five years. Earlier, RBI increased the repo rate several times in the name of controlling inflation. Due to which loans became expensive and the burden of EMI also increased on the people.
The next meeting of the RBI MPC will be held on June 4-6, and a cut in the repo rate is expected in that too. Economists estimate that RBI may implement three more interest rate cuts of a total of 75 basis points in 2025. These measures are aimed at supporting economic growth amid rising trade tensions. Experts believe that the 26% tariff imposed by the US on Indian imports could impact GDP growth by about 40 basis points in 2025-26. In such a situation, the RBI may continue to cut policy interest rates to boost growth.
How will it affect you?
The repo rate is the rate at which the RBI lends to banks. In such a situation, when the repo rate increases, the loan becomes expensive for the banks. They also make the loans of the customers expensive. On the contrary, when the repo rate is cut, the way for the loan to become cheaper opens up. And the possibility of your EMI burden reducing somewhat increases. At a time when almost everything from food to drink has become expensive and now the price of LPG cylinders has also increased by Rs 50, a little relief on the EMI front will also be comforting.
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The RBI holds this meeting every two months to review the monetary policy. The Monetary Policy Committee (MPC) has a total of 6 members, out of which 3 are from RBI, while the rest are appointed by the Center. In this three-day meeting, many issues, including the repo rate, are discussed. Information about the decisions of the meeting is shared on the morning of the third day.
But there will be a shock here!
While the cut in the repo rate may give people some relief on the loan front. They may also get a shock on the fixed deposit i.e., FD, front. In February, when the RBI cut the repo rate by 0.25% to 6.25% after a gap of five years. The interest given by banks on FD was also revised after this. Private sector DCB Bank immediately cut interest rates by 65 basis points on FDs of less than Rs 3 crore, and the new rates came into effect from February 14.
Banks make fixed deposits attractive by paying higher interest so that people keep more money in banks and banks can run their economic activities smoothly. The repo rate is the rate at which the RBI lends money to banks. When RBI cuts the repo rate, banks can borrow money at a lower cost. In such a situation, banks do not need to give higher returns to attract funds. Because of this, they reduce interest rates on FDs. If the Reserve Bank cuts the repo rate again, then there is a possibility that banks may again revise the interest rates on FDs.
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