RBI Maintains 6.5% Repo Rate Amid Growth Concerns
The Reserve Bank of India (RBI) has decided to keep its key interest rate unchanged at 6.5%. This marks the tenth consecutive meeting where the rate remains steady. The decision aligns with expert expectations and aims to balance inflation with economic growth.
RBI Governor Shaktikanta Das announced this after a meeting of the Monetary Policy Committee (MPC) that continued for three days. Notably, this meeting included three new external members appointed by the government. The shift in policy stance to “neutral” signals that rate cuts could be on the horizon as the economy shows early signs of a slowdown.
Insights on the Economy
Das emphasized the need to monitor the health of Non-Banking Financial Companies (NBFCs). He noted that some NBFCs, including microfinance institutions and housing finance companies, are pursuing excessive returns. This push for higher profits is driving retail credit growth, often without actual demand.
Reactions to the Announcement
Industry leaders reacted positively to the RBI’s decision to maintain rates. Mohit Jain, Managing Director of Krisumi Corporation, stated, “Stable rates ensure consistent EMIs, giving homebuyers the confidence to plan their purchases.” He believes that the possibility of future rate cuts could enhance demand in the real estate sector.
Monitoring Unsecured Loans
The RBI is paying close attention to potential stress in unsecured loan segments. Das highlighted concerns regarding loans for consumption, microfinance, and credit card debts. The central bank will monitor these areas closely and take corrective actions if needed.
Banks are advised to exercise caution with their underwriting practices. Continuous attention to inoperative deposit accounts and cyber security is also necessary.
Conclusion
The RBI’s decision to maintain the repo rate reflects its cautious approach amid evolving economic conditions. As growth slows and inflation remains a concern, the future of interest rates remains uncertain but potentially optimistic for borrowers.
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