Home Business & Economy RBI hikes lending rate by 35 basis points; home, auto loans to be expensive

RBI hikes lending rate by 35 basis points; home, auto loans to be expensive

The six-member monetary policy committee headed by RBI Governor raised the key lending rate or the repo rate by 35 basis points to 6.25 per cent

by News Desk
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The Reserve Bank of India (RBI) on Wednesday raised the benchmark lending rate by 35 basis points (bps) on expected lines. This is the fifth increase since May as the RBI said that it remains focussed on bringing down the inflation to a tolerable limit. However, the move to raise the interest rates will make loans, including housing, auto, and corporate credit expensive.

During the announcement, Governor Shaktikanta Das, while referring the Indian economy is in a bright spot in the otherwise gloomy world, the RBI lowered its estimate of GDP growth to 6.8 per cent in the fiscal ending March 31, 2023, from an earlier forecast of 7 per cent.

The standing deposit facility (SDF) rate is adjusted to 6 per cent and the marginal standing facility (MSF) rate and Bank rate to 6.50 per cent. The MPC also decided to remain focused on the withdrawal of the accommodative stance to ensure that inflation remains within the target going forward while supporting growth.

The central bank kept the inflation forecast unchanged at 6.7 per cent for the current fiscal and projected it to come down below the upper tolerance limit of 6 per cent in the fourth quarter of the current financial year.

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The Consumer Price Index (CPI) based inflation, which RBI factors in while fixing its benchmark rate, stood at 6.7 per cent in October. Governor Shaktikanta Das said the central bank remains nimble and flexible in its approach to deal with the price situation.

The six-member monetary policy committee (MPC) headed by RBI Governor raised the key lending rate or the repo rate by 35 basis points to 6.25 per cent. The panel also decided by a majority, 5 out of 6 members, voted to increase the policy repo rate by 35 basis points, while Jayanth R Varma voted against the hike.

With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank has now crossed 6 per cent. This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. In all, the RBI has raised the benchmark rate by 2.25 per cent since May this year.

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