The Reserve Bank of India (RBI) has cut the repo rate, the rate of loan given to banks, by 0.50%. Now the repo rate has remained at 5.50%. Due to this, banks will get loans from RBI at a lower interest rate. If the banks transfer this reduction in interest to their customers, then loans may become cheaper in the coming days. If the loan becomes cheaper, the current EMI of the people will also decrease. The decision to cut interest rates was taken in the meeting of the Monetary Policy Committee held from 4 to 6 June. RBI Governor Sanjay Malhotra gave this information on the morning of 6 June. Understand the effect of interest reduction with an example. The rate at which RBI gives loans to banks is called repo rate. It is increased and decreased to control inflation. After the latest cut, a loan of ? 20 lakh taken for 20 years will get a benefit of about ? 1.48 lakh. Similarly, a loan of ? 30 lakh will get a benefit of ? 2.22 lakh. Both new and existing customers will get the benefit. Repo rate reduced 3 times this year, reduction of 1% RBI had reduced the interest rates from 6.5% to 6.25% in the meeting held in February. This reduction was done by the Monetary Policy Committee after about 5 years. In the second meeting held in April also, the interest rate was reduced by 0.25%. Now the rates have been reduced for the third time. That is, the Monetary Policy Committee has reduced the interest rates by 1% in three times. Housing demand will increase due to reduction in repo rate After the reduction in repo rate, banks also reduce the interest rates on loans like housing and auto. Housing demand will increase when interest rates are reduced. More people will be able to invest in real estate. This will give a boost to the real estate sector. Due to reduction in CRR, ?2.5 lakh crore will come into the financial system RBI Governor Sanjay Malhotra said that it has been decided to reduce the Cash Reserve Ratio (CRR) by 1% from 4.00% to 3.00%. He said that this move of RBI will bring ?2.5 lakh crore into the financial system. CRR is the money that banks have to keep as a part of their total deposits with the Reserve Bank of India (RBI). With this, RBI controls how much money will remain in the market. If CRR is reduced, then banks have more money to give loans, like this time a reduction of 1% will bring ?2.5 lakh crore into the system. RBI reduced inflation forecast, maintained GDP forecast Repo rate cut will boost real estate sector Trehan Iris Executive Director Aman Trehan said that RBI’s reduction in repo rate by 0.50% to 5.5% is a significant boost for the real estate sector. This will make home loans cheaper and will increase the confidence of buyers especially in the luxury segment. Apart from this, Cash Reserve Ratio (CRR) has been reduced by 1%, this will improve liquidity, allowing banks to benefit consumers more effectively. These measures are expected to boost demand for homes, reduce unsold stock and encourage the launch of new projects. What is repo rate, how does it make loans cheaper? The interest rate at which RBI gives loans to banks is called repo rate. With a low repo rate, banks will get loans at lower interest rates. When banks get loans at a lower rate, they often pass on the benefit to customers. That is, banks also reduce their interest rates. Why does the Reserve Bank increase and decrease the repo rate? Any central bank has a powerful tool to fight inflation in the form of policy rate. When inflation is very high, the central bank tries to reduce the money flow in the economy by increasing the policy rate. If the policy rate is high, the loan that banks get from the central bank will be expensive. In return, banks make loans expensive for their customers. This reduces the money flow in the economy. When money flow is low, demand decreases and inflation decreases. Similarly, when the economy goes through a bad phase, there is a need to increase the money flow for recovery. In such a situation, the central bank reduces the policy rate. This makes the loan that banks get from the central bank cheaper and customers also get loans at a cheaper rate. RBI meeting is held every two months. There are 6 members in the Monetary Policy Committee. Of these, 3 are from RBI, while the rest are appointed by the central government. RBI meeting is held every two months. Recently, the Reserve Bank had released the schedule of meetings of the Monetary Policy Committee for the financial year 2025-26. There will be a total of 6 meetings in this financial year. The first meeting is being held on 7-9 April.
