Tuesday, February 27, 2024

Will the loan EMI of common people be reduced, what can RBI do?

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The Monetary Policy Committee meeting of the Reserve Bank of India (RBI) is going to be held right after the interim budget. This meeting is eagerly awaited by all those people of the country who are paying their loan EMI every month. This policy meeting is also important because this will be the last meeting before the election notification. This will be the first meeting of the calendar year and the last meeting of the financial year. Last year in February, RBI last changed the repo rate and increased the interest rates by 0.25 percent. Since then 5 meetings have taken place and no change has been seen in the repo rates.

This time the common people have high expectations. Common people believe that before the elections, the Central Bank can change the interest rates at the behest of the government. By the way, the Federal Bank of America has surprised the whole world by not changing the interest rates. Because last time the Federal Reserve had promised to cut interest rates by 3 times. People expected that as soon as the interest rates in America came down, the Central Bank of India would also cut the interest rates. But after the US Fed, its chances in India also seem to be decreasing. Experts say that the Central Bank is unlikely to make any changes in interest rates in its monetary policy meeting this week, because retail inflation is still close to the upper level of the tolerance level.

EMI will reduce after August?

Bank of Baroda Chief Economist Madan Sabnavis predicted that the MPC will maintain status quo on both rates and stance. He said that this is because according to December data, inflation is still high and there is pressure on the food side. ICRA Chief Economist Aditi Nair said that CPI based inflation is expected to come down in the financial year 2024-25, although the trend of monsoon will be important for this. He said that we do not expect any change in the rates or stance in the upcoming review. A rate cut can be seen only in August 2024.

What is the current repo rate?

The Reserve Bank has kept the short term loan rate or repo rate stable at 6.5 percent for almost a year. It was last increased from 6.25 percent to 6.5 percent in February 2023. Retail inflation was at a high of 7.44 percent in July, 2023 and has declined since then. However, this is still high. Retail inflation was 5.69 percent in December 2023. The government has entrusted the Reserve Bank with the responsibility of keeping inflation within the range of four percent with a variation of two percent. The three-day meeting of the Monetary Policy Committee (MPC) chaired by the RBI Governor will begin on February 6. Governor Shaktikanta Das will announce the committee’s decision on February 8.

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