The Monetary Policy Committee of Reserve Bank of India has made the decision to raise the policy rates by 25 basis points, which is going to have a positive effect on the home loans. This could result in the rise of interest rates. The reverse repo rate is adjusted at 6 percent. Repo rate refers to the rate at which RBI gives loan to the banks. RBI said in a statement that, “The decision of the MPC (Monetary Policy Committee) is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.”
The decision was made with the mutual agreement of all the six MPC members of RBI, Dr Chetan Ghate, Dr Pami Dua, Dr Ravindra H. Dholakia, Dr Michael Debabrata Patra, Dr Viral V. Acharya and Dr Urjit R. Patel. The decision seems to have been taken by the members because of the rise in the retail inflation, which peaked in April to 4.6 per cent.
Some reports had suggested that the committee is going to avoid raising the rates in June, and could instead opt for August for the work. Apart from the changes in the Reserve Repo rate, CPI inflation forecast for 2018-19 has been turned to 4.8-4.9% in the first half of the year and 4.7% in the second half. The GDP growth is expected to be 7.5-7.6% in first half of the year and 7.3-7.4% in second half in the term of 2018-2019. The next meeting of the MPC is going to be organized on 31 July-1 August. Ramesh Nair, CEO and head, JLL India said that even though the hike might be taken more severely by people, its not going to have much effect on the Real estate market.