RBI MPC Meeting October 2024 Update: On Wednesday, the Reserve Bank of India maintained the repo rate at 6.5% for the tenth consecutive time. However, the monetary policy committee shifted its stance from ‘withdrawal of accommodation’ to ‘neutral.’
This means that loans linked to external benchmarks tied to the repo rate will remain stable, providing relief to borrowers as their EMIs won’t rise.
However, lenders might increase interest rates on loans linked to the marginal cost of funds-based lending rate (MCLR), as the full transmission of the 250 basis point hike in the repo rate between May 2022 and February 2023 has not yet been completed.
Since May 2022, in response to the 250 basis points hike in the policy repo rate, banks have increased their repo-linked external benchmark-based lending rates (EBLRs) by a similar amount. During the same period, the one-year median MCLR of banks rose by 170 basis points between May 2022 and August 2024.
In August, while keeping the repo rate unchanged, the rate-setting panel expressed concerns about persistently high food inflation, which could hinder the disinflation process. Headline inflation, measured year-on-year by the all-India consumer price index (CPI), increased to 5.1% in June from 4.8% in May. This rise was largely driven by food inflation, which climbed to 8.4% in June from 7.9% the previous month. “The food component of retail inflation remains stubborn… food inflation accounted for around 70% of the overall retail inflation,” RBI Governor Shaktikanta Das stated.
Last week, the government restructured the Monetary Policy Committee, appointing three external members: Ram Singh, Director of the Delhi School of Economics at the University of Delhi; Saugata Bhattacharya, Economist; and Nagesh Kumar, Director and Chief Executive of the Institute for Studies in Industrial Development.
