RBI hikes repo rate to three-year high of 5.90 percent, loans to get costlier

NEW DELHI: The Reserve Bank of India (RBI) has hiked repo rates by 50 basis points to control high inflation, aggressive central bank policies, and volatile markets. With this, the repo rate rose to 5.90 percent.

The Monetary Policy Committee (MPC) increased the repo rate by 0.5 percentage points. This is the fourth rate hike this fiscal year. Inflation in the country has crossed the RBI's limit for the eighth consecutive month. Economists have predicted that interest rates will rise due to this. With the increase in the repo rate, there is a high possibility that the banks will increase the various loan and deposit interest rates in the country.

The standing deposit facility (SDF) rate was raised to 5.66 percent and the MGF and bank rate to 6.15 percent. The RBI has so far raised the repo rate by 190 bps in the current financial year. After the MPC meeting in June, the repo rate was increased by 50 bps to 5.4 percent from 4.9 percent.

RBI's Consumer Price Index (CPI)-based inflation forecast has been maintained at 6.7 percent for the current fiscal. CPI inflation is assumed to be 7.1 percent from July to September, 6.4 percent from October to December and 5.8 percent from January to March.

RBI Governor Shaktikanta Das stated that various central banks have raised interest rates after the crises caused by the Covid and Ukraine invasion has become a challenge for the country. "The US dollar has reached highs. Rising food prices and the collapse of the global economies pose a challenge to growing economies", Shaktikanta Das said.