The repo rate has risen by 25 basis points to 6.5 percent by the Reserve Bank of India. The RBI has raised the repo rate by 2.5% since May 2022. By a vote of 4:2, the Monetary Policy Committee, chaired by RBI Governor Shaktikanta Das, opted to raise the repo rate.
Reserve Bank of India increases repo rate by 25 basis points to 6.5 percent
Standing Deposit Facility Rate, Marginal Standing Facility Rate, and Bank Rate have all been reduced to 6.75 percent, according to RBI Governor Shaktikanta Das, who also announced the conclusion of the bimonthly monetary policy review. According to him, the RBI would continue to concentrate on removing accommodations in order to maintain target inflation while fostering growth. According to Mr. Das, the expected inflation rate for 2022–2023 is 6.5%, with a Q4 inflation rate of 5.7%. A 5.3% CPI inflation rate is anticipated for 2023–2024.
RBI remains focused on withdrawal of accommodation to ensure inflation remains within target
The RBI Governor noted that the government’s increased emphasis on infrastructure spending and capital projects in Budget 2023 could assist economic growth in the upcoming year. According to the first account advance estimates of NSO, real GDP growth is projected to be 7.0% for 2022–2023 in India, where the economy has remained resilient in the face of turbulent global developments.
How Repo Rate impacts the common man
The cost of borrowing for banking institutions increases along with the repo rate, which is then passed on to account holders in the form of higher interest rates on loans and deposits. It is a strong component of Indian monetary policy that has the ability to control the nation’s currency, supply, inflation rates, and liquidity. The cost of borrowing for banks is also directly impacted by the repo levels. The cost of borrowing for banks will increase when the repo rate increases, and vice versa.
In fact, as a result, bank borrowing money becomes more expensive, which slows market investment and money supply.
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