RBI can cut the repo rate by 0.25%: It will be cheaper to take a loan, Monetary Policy Committee meeting will start from today

The Reserve Bank (RBI) Monetary Policy Committee (MPC) meeting will start today i.e. June 4. According to experts, the Monetary Policy Committee can also cut the repo rate by 0.25% this time. That is, loans may be cheap in the coming days.

On June 6, at 10 am, RBI Governor Sanjay Malhotra will give information about the decisions taken in this meeting. There has been a reduction of 0.50% in two meetings held earlier. Due to this, the repo rate has fallen to 6%. MPC consists of 6 members. Of these, 3 are of RBI, while the rest are appointed by the central government.

In April, RBI cut the repo rate by 0.25% Earlier in April RBI had cut interest rates by 0.25%. The interest rates were reduced from 6.25% to 6%. Earlier in February, the interest rate was reduced by 0.25%. The meeting held in February reduced the interest rates from 6.5% to 6.25%. This deduction was done after about 5 years.

In favor of all factor rate cut SBI Securities Deputy Vice President Sunny Aggarwal said that all factor is absolutely suitable for rate cut. Monsoon is expected to remain normal. GDP growth is stable. Inflation is under control. Retail inflation is at a lower level after July 2019. In the last meeting, the RBI governor also indicated that if inflation remains under control, rates may decrease further. This will boost real estate and auto sector.

What is the repo rate, how is the loan cheaper? The interest rate at which RBI gives loan to banks is called repo rate. Due to low repo rate, the bank will get a loan at low interest. If the loans of banks are cheaper, then they often pass the benefit to the customers. That is, banks also reduce their interest rates.

What will be the change due to decrease in repo rate? After decreasing the repo rate, banks can also reduce their interest rates on loans like housing and auto. All your loans can be cheap and EMI will also decrease. If the interest rates are low, housing demand will increase. More people will be able to invest in real estate.

Why does the Reserve Bank increase and reduce the repo rate? Any Central Bank has a powerful tool to fight inflation as a policy rate. When inflation is very high, the Central Bank tries to reduce money flow in the economy by increasing the policy rate.

If the policy rate is high, then the loan from the Central Bank to the banks will be expensive. In return, banks make loans expensive for their customers. This reduces money flow in the economy. If the money flow is low, there is a decrease in demand and inflation decreases.

Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such a situation, the Central Bank reduces the policy rate. This makes banks cheaper from central bank and customers also get loans at a cheaper rate.