Double Relief for Middle Class: Tax-Free Income and Possible RBI Rate Cut!

New Delhi(The Uttam Hindu): Finance Minister's recent announcement of making income up to ₹12 lakh tax-free has given a significant boost to the middle class. However, eyes are now on the Reserve Bank of India (RBI), which is set to hold its monetary policy meeting from February 5 to 7. The market and public are hopeful that the RBI will ease their financial burden with a rate cut, particularly to reduce the burden of EMIs. The big question: will RBI follow the Finance Minister’s move with a rate cut?

The RBI's decision will be announced on February 7, and it comes after the tax relief provided in the Budget, which has raised expectations, especially among middle-class borrowers. If the RBI decides to cut the repo rate, it will directly benefit those with loans, as it would lower their monthly EMIs. Experts are anticipating that the RBI may reduce the repo rate by 25 basis points, considering easing inflation and the improving economic outlook.

The repo rate, at 6.5%, has remained unchanged since February 2023. Despite 11 monetary policy meetings since then, there have been no alterations. This stability has raised the anticipation that the RBI might finally take action.

The repo rate is the interest rate at which the RBI lends to commercial banks. A reduction in the repo rate makes borrowing cheaper for banks, which then pass on the benefits to consumers by offering lower interest rates on loans. This can reduce the cost of home loans, personal loans, and EMIs for consumers.

With inflation showing signs of cooling down and the economy on a recovery path, the middle class is hoping for further relief. The final decision on whether this hope will be realized will come on February 7, when the RBI announces its policy changes.