Reserve Bank of India (RBI) Governor Shaktikanta Das announced today in the RBI monetary policy meeting to keep the repo rate stable at 4.0 per cent. Let us tell you that this is the 11th consecutive time when RBI has not made any change in the repo rate. Apart from the repo rate, the reverse repo rate has remained constant at 3.35 per cent.
RBI Governor said on Friday that the country’s economy still needs strong support, given that no change is being made in the repo rate. He said that the country’s economy is currently facing two challenges simultaneously. On the one hand, inflation is increasing continuously across the country and on the other hand, the growth rate is declining.
What is the repo rate, and does it affects the commoner?
Just as we take loans from banks for our needs, in the same way, banks also take loans from the Reserve Bank for their needs. The rate or rate at which the Reserve Bank gives loans to banks is called Repo Rate. If the Reserve Bank increases the repo rate, then the loans you get from the bank like home loans, car loans, and personal loans also become expensive.
What is the reverse repo rate?
The way we deposit our savings in the bank and the bank gives us interest for it. Similarly, the bank also deposits its savings amount with the Reserve Bank of India, on which the Reserve Bank pays interest to those banks. This interest is called the reverse repo rate.
How Reverse Repo Rate Affects Common Man
The point to be noted here is that it directly affects inflation whenever cash starts increasing in the market. It simply means that when there is an increase in money in the demand, then inflation also starts rising. In such a situation, the Reserve Bank increases the reverse repo rate, due to which the rest of the banks deposit more and more cash with them to increase the interest received on their savings amount.