New Delhi, October 7 (Daily Kiran) : The Reserve Bank of India (RBI) announced on Wednesday a hike in the repo rate by 25 basis points, raising it from 5.25% to 5.50%. This decision followed a three-day meeting of the six-member Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra.
This marks the first increase in the repo rate since February 2023. The RBI’s decision comes in response to global uncertainties and rising crude oil prices, aimed at stabilizing the country’s economy and controlling inflation.
As a result of this increase, borrowing costs for banks will rise, directly affecting consumers. Monthly installments for home loans, car loans, and personal loans may increase due to higher interest rates.
Additionally, the RBI has adjusted the Standing Deposit Facility (SDF) rate to 5.25% and set the Marginal Standing Facility (MSF) rate and bank rate at 5.75%.
Governor Malhotra noted concerns over a potential resurgence of global inflation, prompting major central banks worldwide to tighten their monetary policies. The rate hike comes at a time when inflation worries are mounting globally, with crude oil prices remaining above $100 per barrel due to ongoing tensions in West Asia, further pressuring both global and domestic inflation rates.
Economists and market experts had anticipated this increase, with SBI Research suggesting that addressing rising inflationary pressures and global economic uncertainties warranted preemptive action. Inflation figures have also raised alarms for the RBI, with the Consumer Price Index (CPI) inflation climbing to 4.82% in August from 4.45% in July. Additionally, risks to Rabi crop production remain due to the El Niño effect and insufficient rainfall.
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