RBI Mumbai/UNI: In a respite for borrowers, the Reserve Bank of India's (RBI) monetary policy committee (MPC) on Thursday decided to keep the policy repo rate unchanged at 6.5 per cent.
The central bank has been raising the repo rate since May last year and has cumulatively hiked it by 2.5% to control inflation which has stayed above its comfort level of 6%.
The increase in benchmark lending rate has resulted in EMIs for various loans such as home, car and personal loans going up.
"The Monetary Policy Committee (MPC) met on 3rd, 5th and 6th April 2023 and assessed the macro-economic situation and its outlook.
"It decided unanimously to keep the policy repo rate unchanged at 6.5% in this meeting with readiness to act should the situations warrant," said RBI Governor Shaktikanta Das after the bi-monthly monetary policy review.
This was the first meeting of the MPC or rate-setting panel in the current financial year 2023-24.
As a result of the decision to maintain the benchmark lending rate at current level, the standing deposit facility (SDF) rate will remain unchanged at 6.25%; and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%.
The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.
The RBI Governor emphasized that the decision to pause on the repo rate is for this meeting only.
Explaining the rationale behind the MPC's decision, Das said that while recent high-frequency indicators suggest some improvement in global economic activity the outlook is now tempered by additional downside risks from financial stability concerns.
"Headline inflation is moderating but remains well above the targets of central banks. These developments have led to heightened volatility in global financial markets as reflected in sizable two-way movements in bond yields.
"Fall in equity markets and the US dollar shedding its gains from its peak of September 2022," he said.
"Amidst this volatility the banking and non-banking financial services sector in India remain healthy and financial markets have evolved in an orderly manner. Economic activities remain resilient and real GDP growth is expected to have been 7% in 2022-23," he further said.
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