Repo rate increased by 0.5 percent, loan will be expensive!

Shivam Bangwal September 30, 2022

1 minute read

New Delhi. The Reserve Bank of India (New Delhi) increased the policy rate repo by 0.5 percent to 5.9 percent in the bi-monthly monetary policy review. This is its three-year high. Repo is the rate at which the central bank lends to commercial banks. An increase in this means that the loan will be costlier and the monthly installment of the existing loan will increase.

This step has been taken by the central bank to control retail inflation and to deal with pressure arising from aggressive rate hikes by central banks of various countries. Along with this, the central bank has reduced the economic growth rate estimate for the financial year 2022-23 to seven percent.

This is the fourth time the policy rate has been increased. Earlier, after 0.40 per cent growth in May, there was an increase of 0.50-0.50 per cent in June and August. Overall, since May, the RBI has increased the repo rate by 1.90 percent.

Giving information about the decisions taken in the three-day meeting of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das said in a televised statement, the MPC has decided to reduce the repo rate by 0.5 percent to 5.9 percent. has decided. He said five out of six MPC members supported the policy rate hike. At the same time, the committee has also decided to continue focusing on withdrawing the soft policy stance to bring inflation under control.

With the increase in the repo rate, the Fixed Deposit Facility (SDF) rate stands at 5.65 per cent while the Marginal Standing Facility Rate and Bank Rate stands at 6.15 per cent.

RBI has retained the inflation forecast for the financial year 2022-23 at 6.7 per cent. It is estimated to be 7.1 percent in the second quarter, 6.5 percent in the third quarter and 5.8 percent in the fourth quarter.

Amid the depreciation of the rupee, Das said volatility in the domestic currency against the dollar is orderly and has depreciated only 7.4 per cent till September 28 this year. He also said that RBI does not fix any exchange rate for the domestic currency. The next meeting of the Monetary Policy Committee will be held on December 5-7, 2022. (Language)