 on Friday raised the repo rate by 50 basis points (bps) to 5.9 per cent in a bid to contain inflation.){kind=link}
The Reserve Bank of India (RBI) on Friday raised the repo rate by 50 basis points (bps) to 5.9 percent in a bid to contain inflation.
This was done on expected lines, as the rate has been above its comfort level for the past many months. Repo rate is the interest rate RBI charges commercial banks for borrowing cash. If RBI raises the repo rate, banks will increase their lending rate for borrowers. This means loan EMIs for consumers would go up.
The RBI move is in line with the global trends of tightening monetary policy adopted by central banks. “Based on an assessment of the macroeconomic situation and its outlook, the MPC (Monetary Policy Committee) decided by a majority of five members out of six to increase the policy repo rate by 50 basis points to 5.9 percent with immediate effect,” RBI Governor Shaktikanta Das while announcing the monetary policy.
Accordingly, the standing deposit facility (SDF) rate stands adjusted to 5.65 percent and the marginal standing facility (MSF) and the bank rate to 6.15 percent. The MPC also decided by a majority of five out of six members to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.
Amid global headwinds posing risks to economic growth, the RBI has lowered the gross domestic product (GDP) growth estimate to 7 percent for the current financial year from 7.2 percent earlier. “The headwinds from extended geo-political tensions, tightening global financial conditions, and a possible decline in the external component of aggregate demand can pose downside risks to growth.
Taking all these factors into consideration, real GDP growth for the current financial year 2022-23 is now projected at 7 percent with Q2 at 6.3 percent, Q3 at 4.6 percent, and Q4 at 4.6 percent with risks broadly balanced,” RBI Governor Das said. The central bank retained the consumer price index (CPI)-based inflation projection at 6.7 percent for the current financial year.