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The Reserve Bank of India (<keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword>), in its third bi-monthly monetary policy statement for FY2014-15, kept the <keyword id="43352" type="UNKNOWN" weightage="100" keywordseo="Repo-rate">repo rate</keyword> unchanged at 8%. The <keyword id="6403556" type="UNKNOWN" weightage="100" keywordseo="reverse-repo-rate">reverse repo rate</keyword>, too, remained the same at 7%. 
 
The statutory liquidity ratio (<keyword id="46197" type="ORGANIZATION" weightage="100" keywordseo="SLR">SLR</keyword>) was slashed by 50 bps to 22%. "The moderation in CPI headline inflation for two consecutive months, despite the seasonal firming up of prices of fruits and vegetables since March, is due to both base effects and the steady deceleration in CPI inflation excluding food and fuel," RBI Governor Raghuram Rajan said. 
 
"The recent fall in international crude prices, the benign outlook on global non-oil commodity prices and still-subdued corporate pricing power should all support continued disinflation, as should measures undertaken to improve food management. There are, however, upside risks also, in the form of the pass-through of administered price increases, continuing uncertainty over monsoon conditions and their impact on food production, possibly higher oil prices stemming from geo-political concerns and exchange rate movement, and strengthening growth in the face of continuing supply constraints," the RBI said. 
 
The central bank said it would continue to monitor inflation and it remained committed to bring CPI inflation to 8% by January 2015 and 6% by January 2016. 
 
“The Reserve Bank has taken a number of steps to enhance efficiency, increase entry, speed up resolution, and improve access to financial services, such as modified regulations on long term lending and borrowing, proposals for licensing payment banks and small banks, a framework to deal with stressed assets, actions to further the use of mobile phones in banking, and efforts to simplify know your customer (KYC) norms, among others,” the bank said in its press release.

RBI Keeps Repo Rate Unchanged, Slashes SLR By 50 bps

The <keyword id="6354335" type="CITY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) cut repo rate by 25 bps to 6.25% and now banks have to be active in passing it to the consumers so that people, especially the home-buyers, benefit from the interest rate cut. 
 The repo rate cut by <keyword id="3715773" type="UNKNOWN" weightage="20" keywordseo="rbi-governor-urjit-patel">RBI Governor Urjit Patel</keyword> has indeed come as a good news for home-buyers as <keyword id="6388045" type="COMPANY" weightage="20" keywordseo="emis">EMIs</keyword> are now expected to go down. 
 
Now, it all depends on the banks as since 2015, despite the RBI slashing the repo rate by 1.50%, the banks have passed on a mere 0.5%. 
 
However, one of the main losers due to the repo rate cut will be people having Fixed Deposits (FDs). This is because, with a lower repo rate, banks will also cut the deposit rate if liquidity is comfortable. This will impact depositors and investors and is expected that the interest on FDs will fall in the immediate future. 
 
If you are still confused on all the repo rates and Cash Reserve Ratio (CRR), here’s the simplified version: 
 
Repo rate: 
Repo rate is the rate at which the RBI lends money to the banks when there is fund crunch and is cut or increased, keeping the inflation in mind. So, if inflation is high and banks increase the repo rate, banks will have to take money from the RBI at a higher rate. 
 
Reverse repo rate: 
Reverse repo rate is the rate at which the RBI borrows money from the banks. If the Reverse repo rate goes up, banks will get more money to park their funds with the central bank. 
 
Cash Reserve Ratio (CRR): 
CRR is the minimum amount that banks have to keep from the total deposits of customers. This goes in the current account of the banks and they do not earn any interest on this. Presently, the CRR is at 4%. 
 
So, how does this affect you? 
 
Home-loans and Auto loans: If banks pass on the rates, consumers will benefit from the cumulative effect. EMIs will fall as banks will also lower down their lending rate as it all depends on banks’ marginal cost of funds based on lending rates. 
 
FD investors: This is impact the fixed deposits as the banks will have to cut rates on the FDs and people will earn less interest.

Decoded: Here’s how repo rate cut will help home-buyers and affect FD investors

The <a href="http://www.businessinsider.in/searchresult.cms?query=RBI">Reserve Bank of India (RBI)</a> on Tuesday maintained status quo and kept <a href="http://www.businessinsider.in/searchresult.cms?query=repo+rate">repo rate</a> unchanged at 7.25%. <keyword id="64009" type="ORGANIZATION" weightage="100" keywordseo="Cash-reserve-ratio">Cash Reserve Ratio</keyword> (CRR) also remained the same at 4%. 
 Due to high inflation and laggered monsoons in some parts of the country, the <keyword id="43352" type="UNKNOWN" weightage="100" keywordseo="Repo-rate">repo rate</keyword> was same. 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=raghuram+rajan">RBI Governor Raghuram Rajan</a> said that sustained hardening of inflation exuding food and fuel was ‘worrisome’. 
 
RBI says policy stance to be conditioned by fuller transmission of rate cuts by banks, food prices and U.S. Fed normalisation signs 
 “<a href="http://www.businessinsider.in/searchresult.cms?query=monsoon">Monsoon</a> were near normal. We will closely follow the food price inflation as it is often sticky,” said Rajan. 
 
This is the third monetary policy review of this financial year. 
 
RBI decided to continue to provide liquidity under overnight repos at 0.25% of bank wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75% of NDTL of the banking system through auctions. 
 
Rajan added that weak exports have a prolonged effect on the GDP. 
 
Although overall business confidence is positive, the level of optimism was a shade lower in April-June than in the preceding quarter. Investment, as measured by new projects, is still weak, primarily because of still-low capacity utilization. In the critically important power sector, where final demand is strong, the recent step-up in generation in response to the commendable easing of bottlenecks in coal supply is being partly negated by structural problems relating to clogging of transmission grids and the dire financial state of electricity distribution companies (DISCOMs). 
 
India Inc had pitched for a rate cut owing to low wholesale inflation and slowdown in industrial growth. 
 
The central bank has lowered its policy rate by three-quarters of a percentage point since embarking on an easing cycle in January. The last cut lowered the repo rate to 7.25% on June 2. 
 
The retail inflation in June increased to an eight-month high of 5.4% and the overall Wholesale Price Index (WPI) based inflation was -2.4% in the same month.

RBI keeps repo rate unchanged at 7.25%, CRR
unchanged at 4%

India’s central bank <a href="https://www.businessinsider.in/finance/news/indias-central-bank-hikes-interest-rates-by-50bps-to-4-9/articleshow/92073644.cms">Reserve Bank of India raised its repo rate </a>for the second consecutive month, from 4.4% to 4.9% on Wednesday. After a small jump in May by 40 basis points, <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword> hiked the interest rate by another 50 basis in its bid to fight inflation. For the month of April, the<a href="https://www.businessinsider.in/finance/news/indias-central-bank-hikes-interest-rates-by-50bps-to-4-9/articleshow/92073644.cms"> consumer price inflation</a> touched 7.8%, burning a hole in common man’s pockets. But why exactly is the Indian central bank hiking interest rates? How does it reduce the burden of expenses on common people like you and I? Let’s find out. <div type="image" title="Wondering where all your money went?" msid="92115914" hostid="261" caption="&amp;lt;p&amp;gt;Wondering where all your money went?&amp;lt;/p&amp;gt;"></div> What is <keyword id="102335" type="General" weightage="100" keywordseo="repo" source="Orion">repo</keyword> rate? Before we dive into this, let’s understand what exactly repo rate is. Repo rate stands for ‘repurchasing option or repurchase agreement.’ It is the rate at which commercial banks and financial institutions like SBI, ICICI Bank, HDFC Bank and others borrow money from the central bank. <div type="image" title="Repo rate agreement" msid="92115941" hostid="261"></div> Why is repo rate increased? If the RBI expects that inflation will rise beyond its tolerance limit, it hikes the rate at which banks borrow money from the central bank. Over the past three months, retail inflation numbers have remained above the RBI’s upper tolerance limit of 6%. The last time inflation was below 4% was before the global pandemic in 2019. When the repo rate increases, the cost of borrowing for banks also increases, which is passed to their account holders by increasing the interest rate on loans and deposit rates. This also makes borrowing money from the bank a costly affair, which in turn slows down investment and money supply in the market. <div type="image" title="How does increase in repo rate affect inflation" msid="92115926" hostid="261" caption="&amp;lt;p&amp;gt;How does increase in repo rate affect inflation&amp;lt;/p&amp;gt;"></div> As a result, it limits money supply and brings down the purchasing power of <keyword id="60468" type="General" weightage="20" keywordseo="consumers" source="Orion">consumers</keyword>, which helps in controlling inflation. The repo rate is reduced when the government intends to infuse money into the market and support economic growth, as it did during the lockdown. In fact, RBI had not increased the repo rate for nearly 4 years until last month. How a small increase in repo rate affects you A small hike in repo rate makes borrowing from the commercial banks expensive. Home loan, vehicle loan, education loan, personal loan, business loan, credit cards, mortgages are all influenced by the rate hike. When the borrowing cost increases, the common man is discouraged from making unnecessary purchases, thereby reducing the demand for goods and services. This kicks off a chain reaction, leading to a reduction in prices and thereby, the inflation. This is simply a game of demand and supply, with the repo rate acting as a catalyst. <div type="image" title="Repo rate is still below pre-pandemic levels" msid="92115961" hostid="261" caption="&amp;lt;p&amp;gt;Repo rate is still below pre-pandemic levels&amp;lt;/p&amp;gt;"></div> On the other hand, people who have savings and have a fixed deposit, for example, <a href="https://www.businessinsider.in/finance/news/why-a-rate-hike-is-not-all-bad-news-for-you-and-how-you-can-take-advantage-of-rising-interest-rates/articleshow/92029328.cms">will benefit from an increase in interest rates</a>. A poll run by <a href="https://bit.ly/3nD94g5">Stocktwits </a>shows that banking stocks might also benefit from the hike in repo rate. <div type="image" title="How will banking stocks perform after RBI&amp;#39;s rate hike?" msid="92115982" hostid="261" caption="&amp;lt;p&amp;gt;How will banking stocks perform after RBI&amp;#39;s rate hike?&amp;lt;/p&amp;gt;"></div> Ripple effects of hike in repo rate When borrowing business loans becomes expensive, businesses either reduce or freeze hiring, leading to unemployment. Consumers also put a pause on buying all luxury items including vehicles, which affects the auto industry. The real estate sector, which was witnessing good pickup in sales due to the low cost of financing, could be impacted by RBI’s rate hike move. As banks increase their interest rate, it will result in a further rise in equated monthly instalments (EMIs) for existing borrowers and <a href="https://www.businessinsider.in/finance/news/home-loan-rates-enter-red-zone-will-dent-affordable-and-mid-segment-sales-the-most/articleshow/92079341.cms">dent new homebuyer’s confidence.</a> Low-interest rates are unlikely to come back as the Indian government predicts that the country’s economy will take at least <a href="https://www.livemint.com/news/india/india-s-economy-to-overcome-covid-losses-in-fy35-recovery-remains-stimulus-dependent-rbi-11651238870034.html">12 years</a> to overcome the setback from Covid-19. It said that the ongoing structural changes catalysed by the pandemic can potentially alter the growth trajectory in the medium-term. Higher interest rates and inflation put the common man in a soup The war in Ukraine significantly increased the common man’s woes. It elevated commodity prices due to geopolitical tension and affected the global supply-chain, tightening financial conditions globally. As a result, due to curbs on imports and high demand for essential commodities, everything from food and beverages to clothing and accessories is expensive today. The common people of India were already struggling to manage their daily expenses with limited purchasing power on a minimum wage. Due to this soaring inflation, consumers are further losing purchasing power, which is a measure of how many goods or services you can buy with a unit of currency, at a <a href="https://www.cnbc.com/2022/05/11/how-fast-does-inflation-cut-buying-power-heres-a-simple-guide.html">faster-than-usual rate</a>. While the current repo rate of 4.9% is still not as high as the pre-pandemic level of 5.15%, the common man will feel the pinch because of higher consumer inflation. <div type="image" title="RBI has revised inflation estimates for FY23" msid="92116013" hostid="261" caption="&amp;lt;p&amp;gt;RBI has revised inflation estimates for FY23&amp;lt;/p&amp;gt;"></div> If the inflation rate continues to increase despite the recent changes in repo rate, RBI will resort to hiking it again in a few months to keep inflation in check.

SIMPLY PUT: How RBI’s repo rate hikes affect consumers

The <keyword id="6354335" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>), on Friday, left the key policy rate unchanged at 6.5 per cent in its monetary policy review for the seventh consecutive time, with the aim of keeping <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> in check and ensuring that the economy moves on a stable growth path. <keyword id="64190" type="General" weightage="20" keywordseo="RBI-Governor" source="Orion">RBI Governor</keyword> <keyword id="6359111" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="Orion">Shaktikanta Das</keyword> said that the decision was made with five of the six members of the <keyword id="6375120" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="Orion">Monetary Policy Committee</keyword> (MPC) favouring no change in the <keyword id="43352" type="General" weightage="100" keywordseo="repo-rate" source="Orion">repo rate</keyword>. Das said the MPC decided to continue with the "withdrawal of accommodation" stance to control inflation. The RBI would continue with its disinflationary policy to ensure a stable growth path for the economy, he added. Das said that <keyword id="120452" type="General" weightage="20" keywordseo="food-price-inflation" source="Orion">food price inflation</keyword> continues to weigh on the trajectory going ahead. The Central bank last changed rates in February 2023, when the repo rate was hiked to 6.5 per cent. The RBI had in fact raised rates by 2.5 per cent between May 2022 and February 2023, after which they have been kept on hold to support economic growth despite inflationary pressures in the past. Repo rate is the interest rate at which the RBI gives short-term loans to banks to enable them to meet their liquidity requirements. Inflation has now come down to around 5 per cent and is well below the RBI's upper tolerance limit of 6 per cent, but the Central bank is determined to bring it down to its medium-term target of 4 per cent, which it considers ideal for stable growth in the economy. RBI Governor Shaktikanta Das has stated several times that although inflation has been moderating, unless it falls to 4 per cent on a durable basis, the Central bank will not think of changing its policy focus. Prime Minister Narendra Modi said at an RBI event on Monday that the Central bank must give top priority to growth but at the same time, focus on trust and stability. With India continuing to clock the fastest GDP growth among the major economies, the RBI has ample headroom to keep interest rates on hold in the near term without hurting growth. The Indian economy had thrown up a surprise 8.6 per cent growth in the October-December quarter driven by government expenditure on big-ticket infrastructure projects and strong domestic demand. The macroeconomic fundamentals of the economy have turned stronger with the fiscal deficit well in control following robust tax collections. The lower fiscal deficit will help control inflation as well as leave more money in the banking system for corporates to take loans for investments as the government needs to borrow less. Economic indicators for the January-March quarter have also been encouraging with exports growing at a decent pace despite the disruption in ship movement due to the Houthi attacks in the Red Sea region. This has led to a decline in the current account deficit reflecting a stronger external balance of payments position.

RBI leaves key repo rate unchanged, focus on keeping inflation in check

The <a href="http://www.businessinsider.in/searchresult.cms?query=rbi+governor+raghuram+rajan&amp;sortorder=effectivedate">Reserve Bank of India</a> cut the repo rate by 25 basis points to 6.50 per cent and left CRR unchanged at 4 per cent. 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=raghuram+rajan&amp;sortorder=effectivedate">RBI Governor Raghuram Rajan</a> retained the "accommodative" stance. 
 
In all, Rajan reduced repo rate by 125 bps in 2015. However, banks have failed to pass on the same, complaining of tight liquidity in the financial system. 
 
It also increased the reverse repo rate to 6 per cent. 
 RBI got room to cut rates after <keyword id="22195" type="COMPANY" weightage="20" keywordseo="Inflation">inflation</keyword> eased to 5.18 percent in February and the Indian government kept borrowing and spending in check. 
The RBI is focussed on attaining inflation targets - aiming for around 5 percent by March 2017, and 4 percent in the medium term.

RBI cuts repo rate by 25 bps to 6.50 per cent, CRR
unchanged

<ul><li><keyword id="3658" type="LOCATION" weightage="20" keywordseo="India">India</keyword>’s <keyword id="6354977" type="ORGANIZATION" weightage="20" keywordseo="Supreme-Court">Supreme Court</keyword> has asked the RBI to assess whether <keyword id="43352" type="PERSON" weightage="20" keywordseo="Repo-rate">repo rate</keyword> cuts translated into lower retail loan rates for Indian people. </li><li>The order from the Supreme Court follows a public interest litigation filed by Moneylife Foundation, which complained that Indian banks were overcharging retail borrowers. </li><li>Despite the recent rate hikes, the RBI embarked on an easing cycle from early 2015 to August 2017, lowering the repo rate rom 8% to 6%. </li></ul>Despite its recent rate hikes and shift towards <a href="https://www.businessinsider.in/reserve-bank-of-india-surprises-all-by-keeping-interest-rates-unchanged/articleshow/66086453.cms">a tighter monetary policy</a>, the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) actually embarked on one of its longest easing cycles from early 2015 to August 2017, lowering the repo rate, or the rate at which it lends money to banks, from 8% to 6% - a seven year low. However, while rate cuts lead to increased consumer confidence and investor sentiment, it remains to be seen the extent that commercial banks pass them on to customers. Seeking a definitive answer on the issue, on 8 October India’s Supreme Court asked the RBI to assess whether repo rate cuts translated into lower rates for Indian people for loans on housing, education, cars and consumer goods.The central bank, which has been given six weeks to present its findings, explained that it was ready to make it binding for domestic banks to cut <keyword id="6371181" type="UNKNOWN" weightage="20" keywordseo="interest-rates">interest rates</keyword> every time the repo rate was cut. The order from the Supreme Court follows a public interest litigation filed by Moneylife Foundation, an NGO focusing on personal finance issues. In response to a RBI report alluding to the same, the foundation wanted to know the extent to which banks and non-banking lenders were overcharging retail borrowers by extending credit at higher rates than the repo rate. The petition also calls for banks to publish the methodology they use to settle on specific lending rates. The issue has been a thorn in the RBI’s side for a while. In response to what it perceived as a slowness of banks to implement repo rate changes, it <a href="https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=35749">announced</a> the introduction of its Marginal Cost of Funds based Lending Rate (MCLR) regime in April 2016. The system compels commercial banks to consider the repo rate when pricing loans as they have to readjust rates on a monthly basis. The MLCR takes into account the incremental changes in cost of funds for banks as opposed to the base rate system, which takes into account the average cost of funds. A change of pace this year The repo rate has been going up since April 2018 as the RBI has sought to keep inflation in check and prevent the return of foreign funds to safe havens like the US, which has embarked on a tightening cycle of its own. However, last week, the central bank opted to keep rates on hold to boost corporate demand and consumer confidence, which has shown signs of declining in response to higher lending rates. Clearly, banks have no qualms in passing on higher rates to customers everytime the RBI increases the repo rate In fact, in anticipation of a rate hike last week, banks like the State Bank of India and HDFC actually increased retail lending rates further.

You Searched For "repo rate" and got 7 results

RBI Keeps Repo Rate Unchanged, Slashes SLR By 50 bps

Manish Kumar

Decoded: Here’s how repo rate cut will help home-buyers and affect FD investors

Akanksha Jain

RBI keeps repo rate unchanged at 7.25%, CRR unchanged at 4%

BI India Bureau

SIMPLY PUT: How RBI’s repo rate hikes affect consumers

RBI leaves key repo rate unchanged, focus on keeping inflation in check

IANS

RBI cuts repo rate by 25 bps to 6.50 per cent, CRR unchanged

BI India Bureau

India’s Supreme Court wants to know if consumers actually benefit when the RBI cuts interest rates

Dilsher Dhillon

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