RBI MPC explained: What the Monetary Policy Committee does and how it affects EMIs, loans and fixed deposits

The Reserve Bank of Indias RBI Monetary Policy Committee MPC meeting is currently underway and it is not just another routine meeting The decisions announced at the end of this meeting can directly affect the finances of millions of IndiansWhether you have a home loan car loan or personal loan the RBIs policy decision can influence your monthly EMIs It can also impact the interest you earn on fixed deposits and savings borrowing costs for businesses and even the prices of goods and services over time Simply put the outcome of the MPC meeting has the potential to affect your everyday financesThe sixmember Monetary Policy Committee MPC chaired by Reserve Bank of India RBI Governor Sanjay Malhotra began its threeday meeting on August 3 and the outcome of the bimonthly meeting will be announced on August 5So what exactly is the MPCThe Monetary Policy Committee MPC is a sixmember committee of the Reserve Bank of India RBI responsible for deciding the countrys benchmark repo rate The sixmember committee also helps set the direction of the countrys monetary policyThe MPCs primary objective is to maintain price stability by controlling inflation while supporting economic growthThe Reserve Bank of India Act 1934 was amended in 2016 to provide a statutory and institutionalised framework for the Monetary Policy Committee to maintain price stability while keeping in mind the objective of economic growthHow can it impact your daily lifeThe Monetary Policy Committee MPC affects your EMIs and home loans through changes in the repo rateHeres how it works in simple termsIf the MPC cuts the repo rateThe RBI lends money to commercial banks at a lower interest rateBanks can borrow more cheaply and may reduce their lending ratesIf your home loan has a floating interest rate your borrowing cost may decreaseThis can result inLower monthly EMIs orThe same EMI with a shorter loan tenure depending on your bankExampleIf your Rs 50 lakh home loan interest rate falls from 9 per cent to 85 per cent your EMI could reduce by around Rs 1500Rs 2000 per month depending on the loan tenureThe Ministry had earlier said that a committeebased approach to determining monetary policy would add significant value and transparency to policy decisions It also noted that MPC meetings must be held at least four times a year with the committee publishing its decisions after each meetingWhat is the monetary policy frameworkThe RBI formulates monetary policy by setting the policy repo rate based on an assessment of the current and evolving macroeconomic situation It also manages liquidity conditions on a daytoday basis through appropriate measures to anchor money market rates according to the RBIThrough monetary policy the central bank aims to achieve price stability maintain financial stability and ensure adequate credit flow to support economic growthThe Reserve Bank also holds prepolicy consultations with economists bankers industry groups and other stakeholders to assess macroeconomic and sectorspecific conditions and gather policy expectations according to the RBIMPC kept repo rate unchanged in JuneIn June the Reserve Bank kept its key policy rate unchanged at 525 per cent and adopted a cautious waitandwatch stance amid the West Asia conflict The central bank also raised its retail inflation estimate for 202627 to 51 per cent from its earlier projection of 46 per cent citing rising input costs driven by soaring crude oil prices amid the USIran conflict