The decision which does not back Government claims about inflation being stable and moving downwards, the Reserve Bank of India has chosen to not change the Repo Rate for 9th time consecutively. The Reserve Bank of India governor Shaktikanta Das announced during the Monetory Policy committee that the Repo rate shall remain at 6.5%. The RBI Governor said that the food inflation remains stubborn.
The Repo rate, also called repurchase rate is the rate at which the RBI lends money to the commercial banks for meeting short-term fund requirements. The rate mechanism is used to maintain liquidity and control inflation. Repo rate is technically a repurchase agreement in which the commercial banks offer securities such as Treasury Bills to the RBI in return for short-term funds. An increase in Repo rate also directly affects the cost of loans given by the commercial banks to the public.
The critics club the unchanged Repo rate with bank rate which has not changed either since June 2023. Bank rate aims to control long-term inflation and stabilise the economy. whereas Repo rate focuses on managing short-term liquidity and ensuring stability in the financial system. It is being pointed out that if the government is claiming that the inflation is under control, why the bank rate is not being decreased? The critics say that the unchanged bank rate for so long is the indirect admission by the government about the untamed inflation. The Chief Economic Advisor in the Economic Survey had stated earlier that India’s inflation continues to be low, stable and moving towards the 4 per cent target.
The RBI keeps the growth projection unchanged at 7.2 per cent for the current financial year.
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