The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 4.0 per cent at its meeting on Thursday.

The reverse repo rate remains unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 4.25 per cent. The apex bank has held the key repo rate at record lows since May 2020. 

The MPC decided to continue with the accommodative stance to revive and sustain growth on a durable basis and continue to mitigate the impact of the COVID-19 pandemic on the economy. This step is likely to ensure that inflation remains within the target in the future.

RBI Governor Shaktikanta Das said in a statement, “India is poised to grow at the fastest pace year-on-year among major economies, according to projections made by the International Monetary Fund (IMF). This recovery is supported by large-scale vaccination and sustained fiscal and monetary support. Once again, our frontline warriors have admirably risen to the call of duty.”

The repo rate has remained paused for nearly two years now, which has created a window of opportunity for homeowners to accelerate their journey out of debt. The 2020 rates could not go lower, but they continued to fall through 2021, reaching as low as 6.40-6.50 in several cases. 

No change in repo rates is good news for borrowers. New borrowers can continue to take loans at competitive rates, while ongoing loans can be pre-paid at low costs. Those with steady incomes should continue to systematically pre-pay either through lump-sums or by EMI increases. This will accelerate their loan payments and prepare them well for rate hikes whenever that happens in the future. There’s also a set of privileged borrowers – women, government employees, armed forces personnel, salaried, those with credit scores over 750 – who can exploit this situation and get the lowest rates.  

All members, including Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Mridul K. Saggar, Dr. Michael Debabrata Patra and Shaktikanta Das, except Prof. Jayanth R. Varma, voted to continue with the accommodative stance. The next meeting of the MPC is scheduled during April 6-8, 2022.

(The author is CEO, Bankbazaar.com)