RBI Raises Repo Rate by 0.5%, Saving Schemes Interest, EMIs Likely to Jump

Key Takeaways:

  • The RBI announced another 50 bp hike in repo rates.
  • The spike would likely impact home loan borrowers adversely.
RBI Raises Repo Rate by 0.5%, Saving Schemes Interest, EMIs Likely to Jump
The Reserve Bank of India has increased its prime lending rate by 50 basis points.

NEW DELHI (CoinChapter.com) — The Reserve Bank of India (RBI) has announced a hike of 50 basis points (bps) (0.5%) in its key lending rate or repo rate. The hike would see India’s repo rate jump to 5.9%, a three-year high.

The monetary policy committee (MPC) announced its decision, making it the fourth time the central bank has hiked the repo rate since May. The Indian central bank had raised the repo rate by 40 basis points in May, followed by 50 basis points rate hikes in Jun and Aug.

RBI followed other central banks in using rate hikes to combat rising inflation. RBI governor Shaktikanta Das pointed out that inflation was not the only reason behind the multiple rate hikes.

Das highlighted that adverse action by the global central banks, naming it the third major shock after COVID-19 and Russia Ukraine conflict.

The news confirmed several analysts’ predictions of a 0.5% rate hike.

However, the RBI governor exhibited his confidence in the economy’s condition, predicting the GDP growth rate for 2023 to remain at 7%. The chief RBI policy maker’s confidence seemed oblivious of Moody’s Investors Service slashing India’s 200 economic growth prediction to 7.7% in early Sept.

In May, the firm had predicted that India’s GDP would expand by 8.8%. Moody’s also expected that RBI policy would remain hawkish to rein in domestic inflationary pressure.

Impact Of Repo Rate Hike

Indian shares rose on Friday to record their best quarter in a year, boosted by banks and metal stocks. The share market was reacting to the news of the RBI rate hikes. The Nifty 50 index ended up 1.6% at 17,094.35, and the S&P BSE Sensex gained 1.8% to 57,426.92.

Both the indexes posted their biggest jump in nearly a month after being down for the last seven days.

Also Read: Bank of England announces £65B QE — Crypto market steady

However, as depositors welcome the rate hike, the news would have left loan borrowers with furrowed brows. Retail banks often raise lending rates after an increase in repo rates, which might put additional pressure on people currently paying EMIs for loans.

NIFTY 50 and Sensex both jumped after news of the RBI rate hike hit the wire
NIFTY 50 and Sensex both jumped after news of the RBI rate hike hit the wire. Source: Tradingview.com

Meanwhile, banks do not necessarily raise their annual returns on savings schemes after a repo rate hike. As a result, investors should remain vigilant before making any fresh investments. Additionally, not only new borrowers, but existing ones too, should keep watch on their interest rates.

Once the RBI raises repo rates, retail banks often increase the loan tenure instead of the monthly EMI to adjust the interest rate hike.

Moreover, the repo rate hike would likely make home loans dearer soon. As a result, the real estate market might see an impact, especially in the sales of residential properties. The rate hike would especially impact the mid-range and affordable housing segments.

There’s another break in the Ripple-SEC legal battle, but XRP might still drop 40%. Here’s why

Leave a Comment

Related Articles

Our Partners

SwapCoin.com RapidCoin.com ChangeNOW.com Paybis.com WestcoastNFT.com