RBI hikes Repo rate by 50 bps to 5.4% from 4.9% with Immediate Effect, Loans to be Expensive

Concerned about rising inflation, the Reserve Bank of India has increased the repo rate by 0.50%. With this, the repo rate has increased from 4.90% to 5.40%. With this hike, the Repo rate is now back to pre-pandemic levels, the highest since August 2019.

After this the financial burden on the citizens will increase as everything from home loans to auto and personal loans will turn expensive and that will reciprocate in a substantial increment in the EMIs. After this hike, the interest rates reached the level of August 2019. The meeting of the Monetary Policy Committee was going on since August 3 to decide on interest rates. RBI Governor Shaktikanta Das gave information about increasing interest rates in a press conference on Friday.

As per the RBI Governer, the Indian economy has been grappling with high inflation. After the increase in the repo rate, 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.

As per the RBI, the global economic and financial environment has deteriorated with the combined impact of monetary policy tightening across the world and the persisting war in Europe heightening the risks of a recession. In fact, the US dollar index soared to a two-decade high in July, due to which this decision has been taken. The next meeting of the Monetary Policy Committee is scheduled to be on the 28th - 30th of September.