RBI’s emphasis on loan transparency is a relief

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RBI) interest rate cycle, its hawkish policy undertone on Thursday must have let many down. Though RBI kept its main repo rate unchanged at 6.5% and stance focused on “withdrawal of accommodation," its inflation concerns set the stage for various scenes to unfold. To fend off a need to think beyond just pause or pivot when its rate-setting panel meets next, deft liquidity control will likely suffice.

In a surprise move, RBI froze an extra slice of cash from bank deposits that must be held in reserve. A temporary measure in response to a swell-up from returned ₹2,000 notes (and other factors), this slurp-up should reduce the risk of spillovers that push prices up. Food prices remain a worry and uneven rainfall has clouded the farm scenario, even as other price pressures persist.

By RBI’s estimates, India’s retail inflation could rise to an average 6.2% in the current quarter. For 2023-24, it is seen averaging 5.4% now, up from 5.1% and even farther from its 4% target. While price stability is a must-achieve, RBI’s concern for those reeling under rate hikes found space on its agenda too.

The central bank’s move to put in place a framework for transparency in the way lenders reset floating payback instalments and tenures will offer loan-bearers some relief. Home-loan customers of banks should be especially pleased, given their long repayment schedules. As rates began to rise last May, many of them suffered ‘EMI shock.’ Some saw their monthly dues go up sharply, while others found their final payment dates had stretched far into the future.