RBI hikes repo rate: On Wednesday, the Reserve Bank of India (RBI) increased the repo rate by 25 basis points to 6.5 per cent. The hike was done by the Monetary Policy Committee (MPC). Earlier in June, the Central bank had hiked the interest rates by 25 basis points. The following hike in the repo rate at two consecutive policy meetings by the central bank comes after the hikes it had made in October 2013. With the new hike, home loans and EMIs are expected to become costlier. As per reports, the hike of interest rates n June was a benchmark lending rate in past four years.
Reports suggest that it is for the second time that the RBI has increased the interest rates by 0.25%. Five out of six committee members had voted for an increase in rate. The hike was done following inflationary concerns. However, the MPC being headed by RBI Governor Urijit Patel has kept their stance neutral.
The rate at which the RBI borrows money from commercial banks stands adjusted to 6.25%. The following hike by the RBI comes after it had raised the repo rate for the first time in four years to 6.25%.
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The repo rate is basically the rate at which the RBI lends short-term money to all the banks. Apart from the repo rate, reverse repo rate has also been hiked by 0.25% to 6.25%. The reserve repo rate is the rate at which RBI borrows money from commercial banks.
Following this move, the home loans, auto loans and EMIs are expected to become costlier as whenever RBI hikes the repo rate, the banks usually pass the interest burden on its customers. Reports suggest that RBI has kept the GDP forecast for the current fiscal unchanged at 7.4%.