Mumbai: The Reserve Bank of India (RBI) has decided to keep the repo rates unchanged at 6.5%. RBI Governor Shaktikanta Das announced this after the Monetary Policy Committee (MPC) meeting of the apex bank. The central bank had hiked the key lending rates six times earlier.
RBI Governor Shaktikanta Das updated that, 5 out of 6 members of MPC voted to remain focused on the withdrawal of accommodation to ensure inflation aligns with target while focusing on growth.
Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Usually authorities use this key lending rate as a weapon to combat inflation. If inflation rises, then apex banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in reducing inflation.
The central bank takes the contrary position in the event of a fall in inflationary pressures. Repo and reverse repo rates form a part of the liquidity adjustment facility.