RBI Repo Rate: The budget for the financial year 2025-26 has come. Now all eyes are on the Reserve Bank. Its Monetary Policy Committee (MPC) will meet between 5-7 February. Since the focus of the budget was on increasing consumption in the country, it is expected that the Reserve Bank will also help the government in this matter by reducing interest rates. Increasing consumption is considered necessary to increase the pace of economic growth in the country.
A big relief has been given in income tax in the budget. Finance Minister Nirmala Sitharaman has made income up to Rs 12 lakh per annum tax-free. Till now this limit of exemption was Rs 7 lakh in the new regime. Pradeep Gupta, co-founder and vice-chairman of Anand Rathi Group, said that consumption is expected to increase due to income tax exemption. Discretionary spending may increase especially among the middle and upper-middle income groups.
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RBI Repo Rate: Centre expects to get Rs 2.5 lakh crore dividend from Reserve Bank and banks
Economic experts, while analysing the budget documents, have estimated that the government can get a total dividend of up to Rs 2.56 lakh crore from RBI and public sector banks. In the last financial year 2024-25, the government got a total dividend of Rs 2.30 lakh crore.
This year the estimated amount can be even higher than this. According to experts, the fall in rupee and earnings from foreign currency assets can be the main reason for this increase.
Inflation can be 4% relief, this is also increasing the scope for reduction in interest rates
Bajoria believes that this year the inflation rate can come down to around 4% according to retail prices. In such a situation, the Reserve Bank should not have any problem in reducing the policy rates. Kunal Kundu, India’s economist at Societe Generale, said that the stance of the new Reserve Bank Governor Sanjay Malhotra is opposite to that of the previous governor Shaktikanta Das. His policies are towards supporting the economy rather than being apprehensive about inflation. If needed, he will not shy away from reducing the repo rate.
Experts hope that there can be a reduction of up to 1% in several phases this year
If the Reserve Bank reduces interest rates a bit, the burden of EMI on the common people will be reduced. This will lead to additional savings. Bank of America Securities i.e. BofA’s India economist (India and Asia) Rahul Bajoria and Elara Securities economist Garima Kapoor expect that RBI will reduce the repo rate by 0.25% to 6.25% in February.
Later, by reducing another 0.75% in a phased manner, the repo rate can be brought to the level of 5.50% by the end of 2025. Also, RBI can increase cash in the banking system by reducing the Cash Reserve Ratio (CRR) by 0.50% or by buying bonds from the open market.
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