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Reserve Bank of India keeps repo rate unchanged

Mumbai: The Reserve Bank of India (RBI) has decided to keep the repo rates unchanged at 6.5%. RBI Governor Shaktikanta Das announced this after the Monetary Policy Committee (MPC) meeting of the apex bank.  The RBI announces its monetary policy bi-monthly — every two months.

‘The Monetary Policy Committee, with three new external members, met on seventh, eighth and ninth, October, and after assessing the evolving macroeconomic and financial conditions and the outlook, the MPC decided by A majority of five out of six members to keep the policy repo rate unchanged at 6.5%,’ RBI governor Shaktikanta Das announced.

The repo rate, currently stands at 6.5%. This is the 10th consecutive MPC meeting which decided on a status quo on repo rate.

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Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Usually authorities use this key lending rate as a weapon to combat inflation. If inflation rises, then apex banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in reducing inflation.

The central bank takes the contrary position in the event of a fall in inflationary pressures. Repo and reverse repo rates form a part of the liquidity adjustment facility.

The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band. The reverse repo rate stands at 3.35 per cent.

The reverse repo rate on commercial banks’ deposits with the RBI.The cash reserve ratio (CRR) stands at 4.5 per cent and the statutory liquidity ratio (SLR) stands at 18 per cent.

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