RBI New Policy 2023 (Monetary) Live Telecast (Link Below): The Reserve Bank of India (RBI) plays a vital role in steering the country’s economy by formulating and implementing monetary policies.
In June 2023, against the backdrop of evolving economic challenges, the RBI announced its latest monetary policy decisions. This article will delve into the key highlights of the RBI Monetary Policy in June 2023 and analyze its potential implications.
The repo rate is stable at 6.5 percent this time too. Thus, if you have taken a home loan or are going to take a car loan soon, then it is a matter of relief for you. The 43rd meeting of the six-member Monetary Policy Committee of the Reserve Bank of India (RBI) began on 6 June 2023.
Repo Rate (RBI New Policy 2023):
Repo rate can be understood in simple language like this. Banks give us loans and we have to pay interest on that loan. Similarly, banks also require huge amount of money for their day-to-day operations and they take loan from Reserve Bank of India (RBI). The rate at which the Reserve Bank charges interest on this loan is called the repo rate.
What is the effect of the repo rate on the common man?
When loans are available to banks at low interest rates i.e. repo rate is low, then they can also give cheap loans to their customers. And if the Reserve Bank increases the repo rate, it will become costlier for banks to take loans and they will make loans costlier for their customers.
Explain that how the change in the repo rate affects the general public, it can be understood in simple language like this. Banks give us loans and we have to pay interest on that loan. Similarly, banks also require huge amount of money for their day-to-day operations and they take loan from Reserve Bank of India (RBI). The rate at which the Reserve Bank charges interest on this loan is called the repo rate.
How many times the interest rate increase last year?
- May – 0.4 %
- June 8 -0.5 %
- August 5 – 0.5%
- September 30 – 0.5 %
- December 7 – 0.35 %
- February 8 – 0.25%
The repo rate has increased by 2.5% in the last one year:
Last year, amidst the rising prices of crude oil, the Reserve Bank suddenly started changing the repo rate after a break of almost 2 years. Since then, in the last one year, loans in the country are continuously getting costlier.
Explain that to control inflation, RBI had increased the repo rate by 2.5 percent between May 2022 and February 2023. Whose effect has been on home and car loans. Due to costlier loans, the EMI burden is also increasing.
Till last year, the home loan and car loans available around 7 percent reached double digits. At the same time, everyone’s personal loan EMI (EMI) is continuously increasing. However, the common people have also benefited in the form of rising rates of fixed deposits.
Key Policy Rates: (RBI New Policy)
The RBI’s Monetary Policy Committee (MPC) decided to maintain the benchmark repo rate at 4%.
The repo rate is the rate at which commercial banks borrow money from the central bank, and it influences interest rates across the economy. By keeping the repo rate unchanged, the RBI aims to support economic recovery while maintaining price stability.
In its policy statement, the RBI acknowledged the recent rise in inflationary pressures, primarily driven by higher global commodity prices, supply chain disruptions, and domestic demand recovery.
However, the central bank expects inflation to moderate in the near term due to the favorable base effect from the previous year.
The RBI aims to maintain the Consumer Price Index (CPI) inflation target of 4% (+/- 2%) in the medium term. The central bank will continue to monitor inflation dynamics closely and take necessary measures to keep it within the target range.
To ensure ample liquidity in the financial system, the RBI announced several measures. It will continue with its accommodative stance and utilize various liquidity tools such as open market operations, long-term repo operations, and term repos to manage liquidity conditions.
The central bank emphasized its commitment to providing liquidity support to sectors affected by the ongoing pandemic, including micro, small, and medium enterprises (MSMEs). These measures aim to bolster credit flow to key sectors and support economic growth.
The RBI highlighted the progress in economic recovery but acknowledged the challenges posed by the second wave of the COVID-19 pandemic. The central bank expects real GDP growth for the fiscal year 2022-23 to be 9.5%, assuming the pandemic remains under control.
However, the RBI cautioned that uncertainties surrounding the evolving pandemic situation, global commodity prices, and supply chain disruptions pose risks to the growth outlook. It stressed the need for continued policy support and structural reforms to strengthen the economy’s resilience.
Financial Sector Reforms:
The RBI emphasized its commitment to financial sector reforms to enhance stability, efficiency, and inclusiveness. It highlighted ongoing initiatives such as the implementation of the Banking Regulation (Amendment) Act, 2020, and the development of the National Payments Corporation of India’s retail payments infrastructure.
The central bank also reiterated its focus on strengthening the supervisory framework and promoting digital payments to ensure a secure and robust financial ecosystem.
Important Links for RBI New Policy:
Official Website of RBI: Link