The Monetary Committee of the Reserve Bank of India (RBI) has given its decision today amid rising inflation due to Russia-Ukraine war. RBI has announced no change in the repo rate for the 11th consecutive time on Friday. The repo rate is stable at 4 per cent. This means that your bank EMI will not reduce. Actually, after the reduction in the repo rate, there is pressure on the banks to reduce the interest rate. If banks cut the interest rate, then the EMI also comes down.
Announcing the results of the Monetary Policy Committee (MPC) meeting, Reserve Bank Governor Shaktikanta Das said that the central bank has changed its slack stance to keep inflation under control while maintaining economic growth. The Reserve Bank last changed the repo rates on May 22, 2020.
Along with this, the reverse repo rate has also been kept unchanged at 3.35 percent. Repo rate is the rate at which the Reserve Bank gives loans to commercial banks to meet their immediate needs. Whereas under reverse repo rate, banks get interest on giving their money to RBI.
Learn the meaning of Repo Rate, Reverse Repo Rate and CRR in easy language and how it affects your life..
Repurchase Rate or Repo Rate
It can be understood in easy language like this. Banks give us loans and we have to pay interest on that loan. Similarly, banks also require a huge amount for their day-to-day operations and they take loans from the Reserve Bank of India (RBI). The rate at which the Reserve Bank charges interest on this loan from them is called Repo Rate.
What is the effect of repo rate on common man
When banks will get loans at low interest rate i.e. repo rate is low then they can also give cheaper loans to their customers and if the Reserve Bank increases the repo rate then it will become costly for banks to take loans and they will make loans expensive for their customers. Will do
Reverse Repo Rate
It is opposite to the repo rate. When banks have a large amount left after a day’s work, they keep that amount in the Reserve Bank. RBI gives them interest on this amount. The rate at which the Reserve Bank gives interest on this amount is called reverse repo rate.
What is the impact on common man
Whenever there is a lot of liquidity in the markets, RBI increases the reverse repo rate, so that banks can deposit their money with it to earn more interest. In this way, less money will be left in the hands of the banks to leave the market.
Cash Reserve Ratio or CRR – CRR
Under banking rules, every bank has to keep a certain part of its total cash reserve with the Reserve Bank, which is called Cash Reserve Ratio or Cash Reserve Ratio (CRR). These rules have been made so that if at any time a large number of depositors in any bank need to withdraw money, then the bank cannot refuse to repay the money.