RBI keeps repo rate unchanged at 6.5 per cent

The six-member monetary policy committee of RBI has unanimously decided to keep the repo rate unchanged at 6.5 percent. However, the RBI would be ready to act should the situation warrant. Consequently, the standing deposit facility SDF rate will remain stable at 6.25 percent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 percent. RBI Governor Shaktikanta Das, who head the committee, announced the decision in Mumbai on Thurday.  Das  said "it's a pause and not a pivot" about the Reserve Bank's surprise decision to hold the key policy rate at 6.50 per cent after hiking the rate six times since May last year. Cumulatively since last May, Reserve Bank of India (RBI) has increased the interest rate by 250 basis points to tackle inflation and the Monetary Policy Committee's decision on Thursday to leave the repo rate unchanged came as a surprise.RBI Deputy Governor Michael Patra, who heads the monetary policy department at the central bank, said, "this pause is valid till 10 am on June 8, 2023 when the Governor will announce the next policy review".

Repo rate is the rate at which RBI lends to banks generally against government securities while the reverse repo is the rate at which RBI borrows money from the banks. Both these rates are key determinants for customers availing loans from banks. A pause in the rate hike comes after six successive rate hikes. In its last monetary policy review announced in February 2023, RBI raised the repo rate by 25 basis points to 6.50 percent. The repo rate has seen an increase of 250 basis points since May last year, primarily to contain inflation. RBI has projected GDP growth for 2023-24 at 6.5 percent with risks evenly balanced and inflation to moderate to 5.2 percent. The next meeting of the Monetary Policy Committee would be held from the 6th to 8th of June 2023.