RBI Monetary Policy remains same and no relief offered to common man in this corona and economic crisis. The RBI did not make any changes in the interest rates and retained the repo rate for the third consecutive time at 4 percent. The RBI Governor Shaktikanta Das decided not to change the repo rate and reverse repo rate. The change in repo rate has a direct effect on the EMI of your home loan, car loan, education loan.
Governor Shaktikanta Das predicted the economy growth decline at 7.5 percent in the current financial year. Das said that the Reserve Bank is committed to safeguarding the interest of depositors in the financial system. They also want to make sure the financial markets functioning in orderly manner. This year commercial banks will not pay any dividends.
Also Read: Loan Moratorium Case decision pronounced in Favour of Banks
The RBI has maintained a soft stance in their monetary policy because they expect inflation to decrease in this winter. Das also said that all the members of the Monetary Policy Committee have decided to keep the repo rate unchanged. They are in favor to control the high level of inflation. He said that they will ensure that sufficient cash available in the economy with current policy. He also said that there are early signs of economic revival seen in the second quarter of the current financial year. Inflation based on the consumer price index expected to be 6.8 percent in the third quarter and 5.8 percent in the fourth quarter.
What is Repo Rate and how this impact to common man with RBI Monetary Policy
In easy words banks give us loans and we have to pay interest on that loan. Similarly, banks also require huge amount of money for their day-to-day operations. For this they take loans from the Reserve Bank of India (RBI). The rate at which the Reserve Bank charges interest on this loan from banks called repo rate.
Also Read: What is Interest on loan moratorium case and why this important for us
And if RBI loans available to the banks at the lower interest rate then everyone get benefited. The common borrowers get cheaper loan from the bank for their need. And if the Reserve Bank increases the repo rate then it will become expensive for banks and their customers respectively.
What is Reverse Repo Rate and how this effect the bank and common man
In easy words when banks left with large amount after their daily work then they keep that money in Reserve Bank. RBI pays interest on this amount for the duration bank keep in the RBI. The rate at which the Reserve Bank pays interest on this amount is called reverse repo rate.
Also Read: Indian economy will drop by 10.5 percent in current FY 2020-21
Whenever large amount of cash appears in the markets then RBI increases the reverse repo rate. With this increased interest banks deposit their money to the RBI for higher interest. In this way banks left with less money to play in the market.
Why RBI should rethink on their monetary policy in this tough time
You all are aware that the corona has impacted every citizens life across the world. Millions have lost their life and Billions have impacted financially. Many people lost their livelihood in this corona pandemic. Millions of people lost their jobs forced to work on less pay with same expenses. Considering all this RBI is not willing to take hit and they don’t want to pass any benefit to common man in this tough time. They continue to find opportunity in this disaster situation.
If RBI will continue to keep the same adamant policy to earn money in this situation. This may make common man very unhappy with current government. And they may face the heat in long run. So we urge RBI to rethink for their monetary policy.
