RBI hesitates to bite the bullet, REPO rate remains intact

October 5, 2018: The Monitory Policy Committee (MPC) of Reserve Bank of India in its Fourth Bi-Monthly Statement for 2018-19, announced today did not increase the policy repo rate as widely expected. There was a time when banks followed closely on the heels of what the central bank did, i.e., when it raised rates, lenders, too, raised their rates. Now, days ahead of the Reserve Bank’s monetary policy announcement, banks and housing finance companies have hiked the lending rates and therefore interest rates on retail loan may not be affected in policy rates remaining unchanged. Further, a lot of what a bank does depends on their overall cost of borrowings, i.e., how the interest rates on deposits move. .

The unchanged key policy rates are as under.

The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.