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. This is the 11th time that the RBI MPC has kept the repo rate unchanged since February 2023. The RBI announces its monetary policy bi-monthly — every two months.
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.
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While the RBI MPC kept the repo rate unchanged at 6.5 per cent, the central bank reduced the cash reserve ratio (CRR) by 50 basis points to 4 per cent. It will free up an additional Rs 1.16 lakh crore in the banking system. A basis point is a 100th of a percentage point. CRR is the percentage of a bank’s total deposits that must be kept in cash with the RBI.
Apart from this, reverse repo rate, bank rate, SDF and MSF remain unchanged at 3.35 per cent, 6.75 per cent, 6.25 per cent, and 6.75 per cent.
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