RBI Keeps Repo Rate Unchanged

REPO RATE – Repo rate refers to the rate at which commercial banks borrow money by selling their securities to the Central bank of our country i.e Reserve Bank of India (RBI) to maintain liquidity, in case of shortage of funds or due to some statutory measures. It is one of the main tools of RBI to keep inflation under control.
After seeing inflation and retail inflation in the sales the repo rate, has to be stagnated at it, to secure the country from the inflation.
RBI kept interest rates unchanged at a record low at 4%. The monetary panel will act to support growth by retaining its accommodative stance for as long as necessary, said by Guv Das.
Technically, repo stands for ‘Repurchasing Option’ or ‘Repurchase Agreement’. It is an agreement in which banks provide eligible securities such as Treasury Bills to the RBI while availing overnight loans. Thus, the bank gets the cash and the central bank the security.
This decrease in repo rate was seen by end of March month of 2020, which went down from 6.25% in February, 2019 to 4.14% and in August it went down to 4% which persistently continues till June, 2021. The levels of repo have a direct impact on the cost of borrowing for banks. Higher the repo rate, higher will be the cost of borrowing for banks and vice-versa.
During high levels of inflation, RBI makes strong attempts to bring down the flow of money in the economy. Now, one way to do this is by Increasing the repo rate, as this in turn makes borrowing a costly affair, because of which businesses and investors slows down the buying, which bleaks the money supply in market. As it is negatively impacting the growth of economy, it helps in retaining the money and hence helps in controlling the inflation.
The policy announcement comes amid huge economic disruptions inflicted by the second wave of coronavirus cases in India. Most of the analysts polled by Bloomberg predict that the RBI will leave key rates unchanged.

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