Impact of RBI MPC Decision

Your coverage of the microfinance sector in the last issue provided valuable insights. I am curious to know how the latest policy from the MPC will affect micro-finance institutions and, ultimately, loan borrowers. - Supriya S. 

Editor Responds: We appreciate your kind words of encouragement. Despite the Reserve Bank of India’s MPC expressing optimism about the growth prospects of the Indian economy, with a revised growth projection of 7 per cent, the policy repo rate remains at 6.5 per cent. Additionally, the repo rate has a substantial impact on the operations of microfinance institutions, as the RBI lends money to these entities at that rate. 

Given the absence of any changes in the repo rate, the equated monthly instalments (EMIs) for home, vehicle, and other loans are anticipated to remain stable for the time being. We anticipate that the central bank will further reduce rates in 2024, providing a potential benefit to borrowers. The repo rate’s impact on NBFCs depends on factors like size, business model, and risk profile. Investors should monitor economic conditions and RBI policies for insights, guiding informed investment decisions.