Keeping in view the uncertainties around inflation, the Reserve Bank of India (RBI) on Thursday kept the repo rate unchanged at 6%. The RBI has kept repo rate constant at 6% for the 4th consecutive time since August 2017. RBI governor Urijit Patel last reduced the lending rate by 0.25% when it came to 6%, and since then it has remained unchanged. The first bi-monthly report for 2018-2019 mentions, “The Monetary Policy Committee (MPC) decided to keep the policy repo rate on hold and continue with the neutral stance. The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4% on a durable basis.”
Meanwhile, the rate at which the Central Bank lends money to other banks for short-term will remain at 6% while the reverse repo rate will remain at 5.75%. Also, the government has asked the Reserve Bank of India (RBI) to target inflation at 4% with plus or minor 2% as its rise above will not help to cut interest rate. A lot depends on the lower repo as if there is a decrease recorded in the repo rate, then it helps in lowering the loan interest rates, which ultimately helps common people who have to pay back or are planning to take loans.
Also, a lower repo rate is a sign of strong economic condition of the country as even a change of few points means a lot to the business community. Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.