RBI Hikes Repo Rate By 50 bps To 5.40 Percent

New Delhi: The Reserve Bank of India (RBI) on Friday increased the repo rate by 50 basis points to 5.40 percent as the new rates.

The decision was taken during a Monetary Policy Committee (MPC) meeting chaired by Banker's bank Chairman Shaktikanta Das.

Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.15 percent and the marginal standing facility (MSF) rate, and the Bank Rate to 5.65 percent.

The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.

In the last two policies, the central bank has hiked the rate by a cumulative 90 basis points in May and June, due to high inflation, which was breaching RBI's upper tolerance band for consecutive months.

''These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent while supporting growth,'' an official statement from RBI said.

With this development, all home, auto, and personal loans follow the hike in repo rate. I will also have a direct impact on loan borrowers since banks and Non-Banking Financial Companies (NBFCs) are anticipated to raise lending rates.

Borrowers would have to pay higher EMIs as banks and housing finance companies may raise their lending rates in response, resulting in addition in your EMIs.

What is Repo Rate?

In simple words, the repo rate means the rate of loan given by the Reserve Bank to other banks. The bank provides loans to its customers with this charge. A lower repo rate means that customers will now get cheaper loan rates for loans like home loans and vehicle loans even at lower prices.

If you are planning on taking a loan, then you better do it soon, as the interest rate on loans could start increasing soon.

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