RBI Monetary Policy Meeting 2024: Will Your EMIs Increase After This Decision?

RBI Monetary Policy Meeting 2024: On Wednesday, the Reserve Bank of India kept the repo rate unchanged at 6.5% for the 10th time in a row. However, the committee shifted its monetary policy stance from 'return of accommodation' to 'neutral.'

In the six-member committee, Saurabh Bhattacharya, Professor Ram Singh, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, and RBI Governor Shaktikanta Das voted to keep the repo rate steady at 6.5%.

No Change in EMIs?

This meeting brought good news for the borrowers who took loans from the banks tied to the repo rate. There is no increase in the repo rate, thus not resulting in any changes in the interest rate of the banks. There is no increase in the EMIs (monthly installments) of the bank. 

However, loans based on the MCLR (marginal cost of funds-based lending rate) may still go up, as banks haven't fully adjusted to the 250 basis points repo rate hike between May 2022 and February 2023.

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RBI Monetary Policy Meeting: Key Highlights

• Policy Repo Rate Unchanged: Five of the six MPC members voted in favor of maintaining the policy report at 6.5%.
• No change in MSF and SDF: As a result, the marginal standing facility, which is the MSF rate and the bank rate, stays at 6.75%, while the standing deposit facility, or the SDF rate, stays at 6.25%.
• Neutral Standing: It was unanimously determined by the Das-led MPC to have a neutral posture and to stay clear-eyed on a long-term inflation alignment with the rate of growth.
• Real GDP in Q1: According to RBI MPC, real GDP increased by 6.7% in Q1.
• No Change in GDP Estimate: The 7.2% GDP estimate for FY25 is not changing.
• GDP to be Consistent: The prediction for GDP growth indicates consistent numbers for each quarter: 7.4% in Q3 and Q4, 7.4% in Q2, and a minor decline to 7.3% in Q1 of FY26.
• Inflation Prediction: With quarterly results of 4.1% in Q2, 4.8% in Q3, and a little slowdown to 4.3% in Q1 FY26, inflation is predicted to be 4.5% for FY25.
• Food and metal Price Increased: If food and metal prices continue to rise in FAO, it could increase upside risks.
• Indian Currency Stability: Among the major currencies throughout the world, the Indian rupee is still the least volatile.
• Shift from Net Outflow to Net Inflow: From June to October, FPI flows showed a shift from net outflows to net inflows totaling $19.2 billion.
• Pre-payment Penalties Not Allowed: No Prepayment penalties are to be levied on any floating rate term loan approved for individual borrowers for non-business uses by banks or non-bank financial institutions.
• CAD Increases to 1.1%: In Q1FY25, India's current account deficit (CAD) increased to 1.1% of GDP. According to Das, "Buoyancy in services exports and strong remittance receipts are expected to keep CAD within the sustainable level."
• FDI Flows to Remain Strong: As both gross and net FDI inflows improved in April–July 2024, the RBI MPC observed that foreign direct investment (FDI) flows are expected to remain high in 2024–2025.
• Foreign Exchange Reserves Crosses US$ 700 Billion Mark: India has achieved a significant milestone by surpassing US$ 700 billion in foreign exchange reserves.

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