New Delhi, December 2023.

Interest rates on home, vehicle, personal and other loans in the banking system will remain unchanged with the Monetary Policy Committee (MPC) of the Reserve Bank of India keeping the Repo rate unchanged at 6.5 per cent in its monetary policy review amid rising risks to inflation due to the recent spike in vegetable prices. The central bank also retained the stance of the monetary policy as ‘withdrawal of accommodation’.

With better-than-expected second-quarter gross domestic product (GDP) print at 7.6 per cent, the RBI has also revised its growth estimate upwards to 7 per cent from 6.5 per cent for FY 2024. The inflation estimate for the fiscal remained unchanged at 5.4 per cent.

Interest rates on loans and deposits are set to remain unchanged as of now. Certain segments of the retail loans are expected to cost more as the RBI recently hiked the risk weights on retail loans. Some banks had recently raised the savings bank deposit rate in certain segments.

Mr. Virat Diwanji, Group President and Head - Consumer Bank, Kotak Mahindra Bank Ltd Said ‘’The RBI monetary policy is on the lines of the wider market expectation. However, the GDP growth projection at 7% is higher than anticipated but seems clearly inspired by the stellar show in the Sept quarter GDP numbers. With the robustness seen across the economy, including the likelihood of a lesser drag on the exports front and private consumption remaining buoyant, the target seems achievable.

Given this assured rate environment, the loan demand will continue to be strong even though there are concerns about the impact of the risk weightage changes on unsecured lending that might lead to a slowdown there. For the consumer banking, the scenario looks very promising. The rural consumption is improving, adding to the resilience of the Indian economy.