RBI Monetary Policy 2023, Repo Rate 6.5% Unchanged, FD Rates High, Didn’t Get Relief from Expensive Loan

RBI Monetary Policy: The Reserve Bank of India has announced the monetary policy and there has been no change in the repo rate and other policy rates. RBI Governor Shaktikanta Das announced this in his address today. In this way, there will be no relief on your loan EMI nor will it increase because RBI has maintained the ‘status quo’ on the rates. In this way, the repo rate will remain at 6.5 percent.
Since there is no change in the repo rate in the monetary policy of RBI, banks will continue to get loans at the same rates. This is the fifth consecutive time that the Reserve Bank did not change its policy rates and kept them stable.

RBI keeps the repo rate steady for the 5th time (The interest rate has been stable since February)

Since February 2023, the RBI MPC has met four times, and every time a decision was taken to keep the interest rate stable. 25 basis points last increased the repo rate in February 2023. The repo rate increased by 250 basis points or 2.5 percent from May 2022 to February 2023.
Announcing the decision after three-day deliberations, the RBI Governor Shaktikanta Das-led monetary policy committee (MPC) on Friday, December 8, 2023, kept the repo rate unchanged for the fifth time at 6.5 percent. He said that five out of six MPC members voted for the continued stance of withdrawal of accommodation.

Inflation at its lowest level in four months

According to the recent official report, due to a fall in food prices, retail inflation had come down to a four-month low of 4.87 percent in October, which is less than the RBI estimate of 5.4 percent.

RBI Governor made 2 new announcements for UPI

First Announcement

RBI Governor Shaktikanta Das said that the UPI transaction limit is being increased from Rs 1 lakh to Rs 5 lakh for every transaction in hospitals and educational institutions. This will benefit UPI transactions for the education and healthcare sectors.

Second Announcement

In the monetary policy meeting, it has been recommended to make changes in the e-mandate for payments of a recurring nature. Under this, the UPI limit for recurring transactions is being increased to Rs 1 lakh per transaction. The RBI Governor has proposed in his address to increase the limit of such UPI payments from Rs 15 thousand to Rs 1 lakh. Under this, the UPI limit will increase mainly for recurring UPI payments for mutual fund subscriptions, insurance policy premiums, and credit card repayments.

Depositors can continue to enjoy high FD rates for now

Depositors will continue enjoying higher interest rates on their fixed deposits for now as the Reserve Bank of India left the key repo rate unchanged at 6.5 percent for the fifth time in a row, on 8 December 2023.
The repo rate is the rate at which the central bank lends money to commercial banks. There is a direct link between repo rates and interest rates on various savings instruments, including fixed deposits (FDs). As the repo rate goes up, so does the FD interest rate, and vice versa when the repo rate drops. Banks often revise the interest rates based on the change in repo rate.

What is RBI MPC?

The Monetary Policy Committee of RBI meets once every two months. This meeting lasts for three days during which policy decisions related to inflation in the country are taken. The most important among these decisions is the repo rate.
This is because if inflation is high in the country, then RBI reduces the money flow in the economy by increasing the interest rates i.e. repo rate, which reduces demand and inflation decreases.

On the contrary, when money flow in the economy needs to be increased, RBI makes the repo rate cheaper. Among these, the repo rate is the most important decision. The repo rate is the interest rate at which RBI gives loans to the banks of the country.

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