RBI keeps key rates unchanged for a sixth time in a row, no respite in Home Loan EMIs

With demand in the market decreasing constantly due to a dip in consumers’ purchasing power, economists had suggested a 25 basis-point cut in the repo rate, at least. This would have helped those consumers who have been affected badly by the coronavirus pandemic.

In its bi-monthly monetary policy review, the Reserve Bank of India (RBI) decided to keep the key rates unchanged. With this decision to maintain the status quo, the EMIs of home and auto loans are unlikely to come down in the near term.

RBI Governor Shaktikant Das said that during the review meeting it was decided to keep the repo rate unchanged at 4 percent and the reverse repo rate at 3.35 percent. Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation. The reverse repo rate is the rate at which the RBI borrows from banks.

It is now the sixth time in a row that the RBI has decided to keep the rates unchanged. Earlier, in the last five reviews also, the Monetary Policy Committee had recommended no changes in the rates. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rates to a historic low.

Market experts were expecting some cut in the rates that could allow some funds into the market. With demand in the market decreasing constantly due to a dip in consumers’ purchasing power, economists had suggested a 25 basis-point cut in the repo rate, at least. This would have helped those consumers who have been affected badly by the coronavirus pandemic.

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