Decision on making loans cheaper right now is difficult, monetary policy will be reviewed next week

The first monetary policy review for the financial year 2024-25 will take place on Friday next week. According to the indications so far, this time also there is little possibility of any relief from RBI regarding interest rates. This will happen because despite the increase in loan rates in the last year ending on Sunday, the pace of lending in the country has not slowed down.

There has been an increase of 19.3 percent in the loans distributed by banks in the financial year 2023-24 ending on Sunday. The rate of growth in loans extended exclusively to the commercial sector has reached 15.4%, the highest level in the previous few years. The second reason cited is that RBI's current assessment of the state of the world is not very trustworthy.

It is expected that the majority of the Monetary Policy Committee (MPC) members will discuss maintaining the stability of statutory rates, such as the repo rate, for the time being in such a scenario. The Central Board of the Reserve Bank of India met last week in Nagpur and covered a wide range of topics, including the national interest rate environment and India as well as the state of the world economy.

Many members of the board had put forward the point that there is a need to be cautious about the instability in the global financial market. Additionally, global geopolitical activities are also unstable. The Ukraine-Russia dispute and the worsening of the situation in the Red Sea can have a wide-ranging impact on the economy of the entire world. The Board of Directors of RBI consists of two Secretaries of the Finance Ministry (Department of Economic Affairs and Department of Financial Services) as members. RBI later implements the suggestions coming in this meeting.

The Reserve Bank of India (RBI) last raised the repo rate in February 2023. This rate is heavily influenced by bank lending rates. The repo rate has remained at 6.5 per cent despite seven reviews of the monetary policy since then. However, the country's borrowing rate has increased by 200 basis points (two per cent) as a result of the increase in the repo rate between May 2022 and February 2023. Still, the rate at which loans are being taken out is rapid. Additionally, the nation's economic growth rate statistics have outperformed the RBI's projections.

Along with the rise in the stock market, there is a rise in the prices of gold and the demand in real estate also remains constant. In such a situation, there is no pressure on RBI to reduce interest rates. The meeting to be chaired by RBI Governor Dr Shaktikanta Das for monetary policy review will begin on April 03, 2024. Its decisions are going to be announced on April 05, 2024.