The RBI Governor-headed six-member Monetary Policy Committee (MPC), which began its deliberations on October 4, announced the bi-monthly monetary policy review on Oct 6.
The RBI Governor-headed six-member Monetary Policy Committee (MPC), which began its deliberations on October 4, announced the bi-monthly monetary policy review today.
RBI MPC Meeting October 2023: Reserve Bank of India on Friday kept the report rate unchanged as was expected from many quarters of the industry.
Announcing the decision, RBI Governor Shaktikanta Das said that the monetary policy committee decided to keep the repo rate unchanged at 6.5 per cent unanimously.
He added that MPC will remain watchful of inflation and remains resolute to its commitment to align inflation to the targeted level.
The RBI Governor-headed six-member MPC, which began its deliberations on October 4, announced the bi-monthly monetary policy review today.
RBI started increasing the policy rate in May 2022 in tranches in the wake of the Russia-Ukraine war and took it to 6.5 per cent in February this year. Since then, it has kept the rate unchanged in the last three successive bi-monthly monetary policy reviews.
The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.
Earlier experts believed that the was expected to maintain the status quo on the benchmark interest rate at its bi-monthly monetary policy review in view of elevated inflation and global factors.
Impact on home loans
The status quo is likely to bring some relief for home loan seekers and those who are already paying EMIs as the payouts will be maintained as it is.
Shishir Baijal, chairman and MD, Knight Frank India, added that a pause will be supportive of the real estate sector in maintaining its current momentum. With the last few revisions, the repo rate has gone up by 250 BPS, resulting in 160bps hike in the base lending rate, with the last three revisions being completely passed on to the home buyers.
“This has started to impact housing demand, especially in the affordable segment. The mid segment too has seen growth moderating in the last few quarters. A further increase in the REPO rate could potentially dampen buyers’ sentiment and impact housing affordability,” Baijal added.
Ramani Sastri, Chairman and MD, Sterling Developers, said, “The economy is looking robust with high investments across businesses in recent times. A recovery in property prices and rise in yields has made investment in residential properties attractive yet again and has been responsible for continued demand in the sector. The long-term benefits of owning a home have led to sustainable growth in the segment. Hence, we expect a continuation of existing policy rates through 2023 and undoubtedly, a further reduction in interest rates in the near future would be preferred to bolster overall market confidence and make it more enticing for home buyers.”
The Reserve Bank has been mandated by the government to ensure the Consumer Price Index (CPI) based retail inflation remains at 4 per cent, with a margin of 2 per cent on either side.
Das also said, “Macroeconomic stability and inclusive growth are the fundamental principles underlying our country’s progress. The policy mix that we have pursued during recent years of multiple and unparalleled shocks has fostered macroeconomic and financial stability. The twin balance sheet stress that was encountered a decade ago has now been replaced by a twin balance sheet advantage with healthier balance sheets of both banks and corporates.”
The retail inflation was 6.83 per cent in August, above the RBI’s comfort level. In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points, and it was followed by rate hikes of varying sizes, in each of the five subsequent meetings till February 2023.
The MPC consists of three external members and three officials of the RBI. The external members of the panel are Shashanka Bhide, Ashima Goyal, and Jayanth R. Varma. Besides Governor Shaktikanta Das, the other RBI officials in MPC are Rajiv Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).
