How Will RBI’s Decision Affect Your Loan EMI?

This decision will mostly affect people with home or car loans from banks. Banks set their loan interest rates based on the repo rate, which affects how much you pay for your EMI (Equated Monthly Installment).

Due to rising inflation in India, the Reserve Bank of India (RBI) has decided to keep the repo rate at 6.5% in its August review. This is the 9th time in a row that the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged. The last change to the repo rate was in February 2023. This is only the second time in 25 years that the RBI has kept the repo rate the same for such a long period.

Impact on EMI

This decision will mostly affect people with loans. Since banks use the repo rate to set loan interest rates, keeping the repo rate unchanged means your EMI will stay the same.

The MPC meeting was held from August 6 to 8. On the last day, the 6-member committee decided by a 4-2 vote to keep the repo rate the same. The central bank also said it will end its accommodative monetary policy. Additionally, the Standard Deposit Facility (SDF) rate will be 6.25%, and the Marginal Standing Facility (MSF) rate will be 6.75%.

Inflation Forecast

This was the 50th meeting of the MPC. The RBI Governor said the committee wants to bring inflation down to around 4%. So, any changes to the monetary policy will focus on inflation. Food inflation is still a concern, but overall inflation levels have been decreasing. Core inflation might go down in the third quarter of the financial year.

The central bank estimates inflation will be 4.5% for the financial year 2024-25. In the July-September quarter, it may be 4.4%, 4.7% in the October-December quarter, and 4.3% in the January-March 2025 quarter. This forecast is different from June’s forecast, which predicted inflation of 3.8% in the second quarter, 4.6% in the third quarter, and 4.5% in the fourth quarter. For 2025-26, inflation is expected to be 4.4%.

Economic Growth

Governor Shaktikanta Das said the real GDP growth rate for the current year is expected to be 7.2%. The growth is projected to be 7.2% in the first and second quarters, 7.3% in the third quarter, and 7.2% in the fourth quarter. In the June policy review, the central bank estimated the GDP growth rate for 2024-25 at 7%. The RBI also predicts a 7.2% real GDP growth rate for the first quarter of 2025-26.