RBI Monetary Policy June 2021: No respite to home and auto loan borrowers; RBI keeps interest unchanged at 4%

New Delhi: The EMIs on home and auto loans are unlikely to come down in the near term as the Reserve Bank of India on Friday kept the key policy rates unchanged in its bi-monthly Monetary Policy review.

The central bank announcing the outcome of its bi-monthly Monetary Policy rates on June 4 said that it has decided to keep the repo rate unchanged at 4 percent and the reverse repo rate at 3.35 percent. Repo is the rate at which RBI lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation. The reverse repo rate is the rate at which the RBI borrows from banks.

The MPC kept the key benchmark rate unchanged in its last five reviews. This is the sixth time in a row that MPC has decided to keep the policy rate unchanged. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rates to a historic low.

The 6-membered MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target. The central bank lowered its estimate for economic growth to 9.5 per cent for the current fiscal from earlier projection of 10.5 per cent due to the impact of the second COVID wave.

Meanwhile, the government on Monday released India`s GDP figures, with data showing that India’s economy contracted by less-than-expected 7.3 percent in the fiscal year ended March 2021.

The data furnished by the National Statistical Office (NSO) showed that real GDP or Gross Domestic Product at constant (2011-12) prices in 2020-21 attained a level of Rs 135.13 lakh crore, as against the `first revised estimate` of GDP for the year 2019-20 of Rs 145.69 lakh crore.

“`GDP at Constant (2011-12) Prices in Q4` of 2020-21 is estimated at Rs 38.96 lakh crore, as against Rs 38.33 lakh crore in Q4 of 2019-20, showing a growth of 1.6 per cent,” according to the GDP estimates released by the Central Statistics Office (CSO).Besides, the CSO said: “There was a sharp spike from Rs 2.27 lakh crore in BE 2020-21 to Rs 5.95 lakh crore in the revised Estimates for the major subsidies (especially food subsidies) of Centre, presented in Budget 2021-22, in RE 2020-21.”

Bureau Report