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RBI keeps key lending rate unchanged

Mumbai: The Reserve Bank of India (RBI) has decided to keep the repo rates unchanged at 6.5%.This is for sixth consecutive time  that RBI is keeping the key lending rate unchanged. RBI Governor Shaktikanta Das announced this after the Monetary Policy Committee (MPC) meeting of the apex bank. The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) commenced its first meeting of the year on February 6, 2024.

The MPC raised the policy rate by 40 basis points in May 2022. It  was followed by rate hikes of varying sizes, in each of the five subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.The last adjustment occurred in February 2023, increasing the rate from 6.25%.

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.

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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.

The RBI MPC is comprised of six members, including both external members and RBI officials. This includes the RBI Governor, 2 deputy governors, and 3 external members.

The MPC members are:

1) Shaktikanta Das, Governor of RBI

2) Michael Debabrata Patra, Deputy Governor of RBI

3) Rajiv Ranjan, Officer of RBI nominated by the Central Board, Member

4) Prof. Ashima Goyal, Professor, Indira Gandhi Institute of Development Research, Member

5) Prof. Jayanth R. Varma, Professor, Indian Institute of Management Ahmedabad, Member

6) Dr. Shashanka Bhide, Senior Advisor, National Council of Applied Economic Research, Member.

 

 

 

 

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