Let’s talk about the big news from RBI and the change in the repo rate. This news has come at a time when inflation is at its peak, we are showing and telling the current scenario happening in the country. But now common citizens can get a big blow and it is that your loan will be more expensive from now on. Because RBI Governor Shaktikanta Das has said a big thing in this regard. You also know and listen.
That is, if you have taken a loan, then this news is for you and this decision of RBI can prove to be a big setback for you. RBI has increased the repo rate. Shaktikanta Das has given important information in this regard that RBI has increased the repo rate by 0.40 percent to control inflation. If seen, the repo rate is 4.40 percent. Due to this, all types of loans will now become expensive.
Overall, on one hand, where inflation is wreaking havoc. On the other hand, the increase in loan rates can prove to be a big blow for everyone. Let us inform you that retail inflation rose to 6.95 percent in March. This rate is the highest in the last 17 months. After the hike in fuel prices, the prices of kitchen utensils have also gone up. In such a situation, the cost of the loan can also create a lot of problems not only for the middle class but also for the people who have taken the loan.
Statement by Shri Shaktikanta Das, RBI Governor https://t.co/cktaninqLF— ReserveBankOfIndia (@RBI) May 4, 2022
Last month, the central bank kept two benchmark economy-wide interest rates unchanged at record lows, a signal that the RBI continued to prioritize growth recovery despite inflationary winds sweeping the world and India in the aftermath of the Russia-Ukraine conflict.
What is Repo Rates:
Repo rate refers to the rate at which commercial banks borrow money by selling their securities to the central bank, while reverse repo rate is the rate at which the central bank borrows money. These rates are key to boost credit and investments by businesses in the economy, as India pushes its nascent economic recovery. The Monetary Policy Committee’s (MPC) review of the economy is key to markets and general business sentiment.
In its last rate-setting meet, the central bank’s six-member MPC voted to hold the repo and reverse repo rates at 4% and 3.5%, respectively. Such a policy approach is referred to as an “accommodative stance”, which means that it remains conducive for easier borrowing. Today’s upward revision, the RBI has turned to a so-called hawkish stance, which means that it could raise interest rates further as inflation begins to weigh in on the economy.
Globally inflation is rising and high prices have found their way into the country through costlier oil. Rich economies are fast raising interests rates to tamp down high inflation. Lower interest rates make borrowing by businesses and government easier, helping to increase the economy’s output and GDP rate, but they can also fan inflation. The government, for instance, makes good a chunk of its fiscal deficit – the difference between the government’s earnings and expenditure – by borrowing money by selling bonds.