Repo Rate Unchanged – 5 Takeaways For The Common Man

The six-person Monetary Policy Committee has voted 5-1 in favour of maintaining the repo rate at 6.00%. The repo rate is the interest rate at which India’s central bank, the Reserve Bank of India, lends to commercial banks. Here are some key takeaways for the common from this Monetary Policy Review (MPR).

1 – Still A Good Time To Take Home Loan

Interest rates on loans of all varieties have been trending downwards over the last three years. The latest MPR means that the rates will remain where they are or increase marginally. Nevertheless, the rates continue to attractive, and this is especially useful for home owners. They can continue to take new loans to fund their dream home purchase. Persons currently repaying loans will continue to enjoy the same interest rate for now.

2 – Fixed Deposit Rates Could Rise   

You can continue to have short-term fixed deposits as a low repo rate translates into moderate returns from fixed deposits. With this MPR, the returns are expected to be stable for now, with the expectation of marginal increments.

3 – Small Savings Untouched

Returns from government schemes such as the PPF, Sukanya Samriddhi, Senior Citizens Schemes etc. have fallen in recent years. But with this MPR, we can expect their returns to stop falling for the immediate future. If the repo rate rises again, we can expect small savings returns to rise too.

4 –Try Liquid Funds

Investors looking for marginally higher returns and greater tax efficiency than fixed deposits can invest in liquid mutual funds and short term debt funds, which contain securities with short maturity periods. They are low-risk and can be liquidated instantly, just as a fixed deposit can.

5 - For Higher Returns, Invest In Equity Mutual Funds

Interest rates on bank deposits and small saving schemes have been moderate in recent times. With the latest MPR, the rates will remain where they are. If you’re looking to earn higher returns, investing in equity mutual funds should be the way to go. Despite the introduction of an LTCG tax on gains above Rs. 1 lakh, equity continues to be the most attractive option for long-term savings.

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