The Reserve Bank of India on Thursday decided to keep the repo rate unchanged at 6.50%. The repo rate is the interest rate at which the central bank lends money to commercial banks.
The central bank’s decision to maintain status quo on the repo rate comes after six consecutive hikes which saw the lending rates go up by 250 basis points, or 2.50%, since May last year. Reserve Bank of India Governor Shaktikanta Das made the announcement after the central bank’s bi-monthly monetary policy meeting.
At a press briefing, Das said that while the repo rate has not been changed, the central bank would be ready to act if the monetary policy situation demands it.
The RBI has also raised the estimate for the growth rate of the country’s gross domestic product for the current financial year of 2023-’24 to 6.5% from the earlier projection of 6.4%, Das said.
The central bank has also predicted an inflation rate of 5.2% for the country in the financial year 2023-’24, he said.
The Economic Survey released by the Union finance ministry on January 31 had predicted that India’s gross domestic product, or GDP, would grow by 6% to 6.8% in the next financial year. In this fiscal year (2022-’23), India’s economy is expected to grow by 7%.
The six successive rate hikes since May last year had come in the wake of high inflation in India, as the indicator of price rise remained above the RBI’s mandated range of 2% to 6%.
Central banks typically increase key lending rates at times of high inflation in economies. Higher key lending rates translate into high interest on loans disbursed by commercial banks. This, in turn, keeps a check on discretionary spending by consumers which is expected to help them with prices rise due to high inflation.