Business

RBI maintains repo rate at 6.25%

07 Dec 2016 | By Sneha Johny
RBI maintains repo rate

Amidst rising expectations of a rate cut from the Reserve Bank of India, the central bank kept the repo rate unchanged at 6.25%.

Many had pinned their hopes on lower rates, to help gain cheaper loans and increase investments.

Since January last year, the RBI has lowered the repo rate seven times.

The monetary policy committee also retained the bank rate at 6.75%.

In context: RBI maintains repo rate

AboutRBI

The Reserve Bank of India is the country's central apex bank that forms the governing and regulatory body for monetary policies in India.

Established nearly 81 years ago, the RBI is currently headed by Urjit Patel, who serves as Governor.

The RBI has reserves of over $363 billion and is headquartered in Mumbai.

The institution controls the bank rate and interest rates on reserves.

What is a repo rate?

Repo rate is referred to the rate used by the RBI to lend money to commercial banks whenever there arises a shortage in funds. The repo rate is also used to control inflation in the country, where the RBI increases the rate to lower inflation.
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RBI cuts repo rate to 6.25%

04 Oct 2016RBI cuts repo rate to 6.25%

Two months ago, the Reserve Bank of India cut its repo rate by 25 basis points to lower it to 6.25%.

The bank also said that the reverse repo rate, the rate at which RBI borrows from banks, will be maintained at 5.75%.

The stock market surged on the reports.

The rate cut translated to cheaper and inexpensive loans for borrowers.

Industry experts expect further rate cuts

"The industry expects a lot of value addition from the MPC and possibly another rate cut before March 2017, while expecting real transmission of the lower rates by the banks," Associated Chambers of Commerce (Assocham) Secretary General D S Rawat said.

07 Dec 2016RBI maintains repo rate at 6.25%

What was the market impact?

Along with keeping the rates unchanged, the RBI also lowered growth forecasts to 7.1% from 7.6%. The Sensex dropped nearly 155.9 points, while the Nifty fell 41.10 points.