The Reserve Bank of India (RBI) has maintained the key interest rate unchanged for the third consecutive time. The Monetary Policy Committee (MPC) unanimously decided on 10 August 2023, to keep the repo rate steady at 6.5 percent.
- The repo rate is the rate at which RBI lends money to commercial banks.
- The standing deposit facility (SDF) rate is unchanged at 6.25 percent, and the marginal standing facility (MSF) rate and the Bank Rate remain at 6.75 percent.
- The MPC’s focus is on gradually withdrawing accommodation to align inflation with the target while supporting economic growth.
- RBI has revised the Consumer Price Index (CPI) inflation target for the current fiscal to 5.4 percent.
- RBI Governor Shaktikanta Das projected a real GDP growth of 6.5 percent for the fiscal year 2023-24.
- RBI will introduce a framework allowing borrowers to switch from floating to fixed interest rates, benefiting home, auto, and other loan borrowers.
- Lenders will need to clearly communicate with borrowers about tenor and Equated Monthly Installments (EMI) under this framework.
- The decision to introduce the framework follows supervisory reviews that revealed instances of lenders extending floating rate loan tenors without proper communication or borrower consent.
Q.: What is the repo rate, as defined in the context of the RBI’s monetary policy?
a) The rate at which banks lend money to RBI
b) The rate at which RBI lends money to banks
c) The rate at which RBI lends money to the government
d) The rate at which banks lend money to each other
Ans : b) The rate at which RBI lends money to banks
