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

New Delhi: Home and auto loan borrowers have to continue with their current EMIs that 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 August 6 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 six reviews. This is the seventh 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. 

MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent. Observing that economy is slowly recovery from brief hiatus, the Governor said, some of the high frequency indicators reflect recovery. 

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