Banking Central | What does the monetary policy mean for you and your budget?

Sanjay Malhotra led RBI chose to hold the repo rate steady at 5.5 percent in its October review.

How many of you follow the Reserve Bank of India’s monetary policy and decode what it means for you and your finances?

Let us be honest, for most households, the bi-monthly policy review is like a closed-door conversation between economists who love charts and bankers who love jargon. Yet, every line in the policy statement has a way of sneaking into your household budget — either through your EMI or your savings.

This time, too, the RBI chose caution over relief when it shared the policy outcome on October 1. By holding the key repo rate steady at 5.5 percent yet again, it basically said, “Don’t expect your home or car loan EMIs to ease anytime soon.” Inflation isn’t running wild but it hasn’t cooled enough for the central bank to turn generous.

For the first-time homebuyers, especially in crowded, overpriced cities, this pause only stretches the wait. Banks have long moved past the teaser-rate days. Floating loans are now flirting with multi-year highs. This also means that those who jumped into property during the pandemic are now learning a hard truth: interest rate cycles don’t care about your dreams.

What about depositors? They’ve waited patiently for years and while the ever reliable fixed deposits (FD) look better than before, banks aren’t exactly rolling out the red carpet.

With liquidity improving, some lenders have started trimming FD rates. Senior citizens who rely on interest income may have to hurry and lock in or watch the rates quietly slip again.

Then there is also the worry of slowing consumer spending. For years, retail loans powered banking profits. Credit cards, personal loans, buy-now-pay-later schemes — it was all one big party. The RBI has now hit the caution button. Going forward, your spending power will depend less on enthusiasm and more on your credit score.

The RBI also did a soft tap on banks over service charges and grievance redressal. A small but rare acknowledgment that customers are tired of paying for mysterious “value-added services” they never asked for. But let’s be real. Until penalties bite, most consumers will continue battling automated helplines and templated emails.

So, what does the October policy have for the people? That monetary discipline has a cost — and it’s not paid by stock markets or corporate treasuries. It’s paid by households who plan their lives in EMIs and instalments.

(Banking Central is a weekly column that keeps a close watch on the sector’s most important events)