New Delhi: RBI Hike Repo Rate: RBI has decided to increase the repo rate. RBI’s policy review meeting has decided to increase the rate by 50 basis points. RBI Governor Shaktikanta Das said that this interest rate hike will be implemented with immediate effect. Due to this decision of RBI, the repo rate has gone up to 5.40 percent.
Home loans, education, personal, car loans will become more expensive as RBI hikes repo rate. There are fears of further burden on the common man who is already struggling with inflation. Increasing the interest rate controls the buying in the market. As a result, the inverse ratio of supply and demand balances to some extent. It helps in curbing inflation to some extent.
Earlier, the RBI had hiked the repo rate by 40 basis points after the monetary policy meeting in May 2022. After that, the repo rate became 4.40 percent. Then after the meeting held on June 8, 2022, it was decided to increase the repo rate by 50 basis points. After that, the repo rate increased to 4.90 percent. The RBI had raised rates by nearly 90 basis points in a single month.
What is repo rate?
Repo rate is the rate at which banks borrow money from the Reserve Bank. An increase in the repo rate means an increase in the lending rate that the banks get from the Reserve Bank, while a decrease in the repo rate means that the bank gets cheap money. That is, if the RBI increases the repo rate, all the banks have to increase the loan rates offered to the customers as an alternative. As it decreases, the interest rate decreases.
What is Reverse Repo Rate?
Reverse repo rate is the opposite concept of repo rate. Banks borrow money from the Reserve Bank. Similarly the Reserve Bank borrows money from these different banks. The rate which applies on this is reverse repo rate.
