RBI Keeps Repo Rate Unchanged at 6.5%: How It Affects Your Loan EMIs

On December 6, 2024, the Reserve Bank of India (RBI) announced its 5th bi-monthly monetary policy review for FY25. The 6-member Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, has decided to keep the benchmark repo rate unchanged at 6.5% for the eleventh consecutive meeting. In addition to this, the MPC has opted to maintain the policy stance as ‘Neutral’.

Key Takeaways from the RBI MPC December 2024

1. Repo Rate Unchanged at 6.5%: Impact on Loan EMI

The central bank has kept the repo rate steady at 6.5%, signalling stability in its approach towards controlling inflation while ensuring support for economic growth. This marks the 11th consecutive time the rate has been maintained at this level. The MPC’s stance continues to be neutral, balancing growth and inflation concerns. As a result of no change in the RBI Repo Rate, there will be no impact on loan EMI on an immediate basis.

2. Price Stability and Growth

Addressing the challenges of managing inflation, RBI Governor Shaktikanta Das emphasised that price stability is crucial for the well-being of the people. However, he also acknowledged that economic growth cannot be sidelined. Das highlighted that the final leg of disinflation remains a tough and protracted journey, indicating the challenges economies face in bringing inflation to target levels.

3. Cash Reserve Ratio (CRR) Cut:

In a move aimed at boosting liquidity in the economy, the RBI announced a reduction in the Cash Reserve Ratio (CRR) by 50 basis points (bps), bringing it down to 4%. This reduction will infuse ₹1.16 lakh crore into the banking system, which can be used for productive investments, potentially stimulating economic activity.

4. Inflation Forecast for FY25

The RBI revised its inflation projections for FY25, forecasting retail inflation to rise to 4.8% from the previous estimate of 4.5%. The breakdown of the inflation forecast for the upcoming quarters is as follows:

• Q3FY25: 5.7%
• Q4FY25: 4.5%
• Q1FY26: 4.6%
• Q2FY26: 4%

5. Revised GDP Growth Estimates

In a significant update, the RBI revised its FY25 GDP growth estimate downwards to 6.6%, from the earlier projection of 7.2%. The revised GDP growth estimates for the upcoming quarters are as follows:

• Q2FY25: 7.0% (unchanged)
• Q3FY25: 6.8% (down from 7.4%)
• Q4FY25: 7.2% (down from 7.4%)
• Q1FY26: 6.9% (down from 7.3%)
• Q2FY26: 7.3% (unchanged)

Conclusion

The RBI’s decision to keep the repo rate steady at 6.5% and adopt a neutral stance signals its commitment to balancing inflation control and growth support. While inflation remains a concern, the central bank has taken steps to address liquidity challenges with the CRR reduction. The revised inflation and growth projections indicate that the economy is likely to experience moderate inflationary pressures and slightly slower growth than previously expected in FY25.

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