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RBI Hikes Repo Rate By 50 bps To 4.90%, 2nd Hike In 2 Months

The central bank has also decided to raise MSF Rate and Bank rate to 5.15% from 4.65%

Story Highlights
  • The announcement was made following a three-day meet of the Monetary Policy Committee.
  • The central bank has also decided to raise MSF Rate and Bank rate to 5.15% from 4.65%.
  • The hike in rates for the second time in two months comes as no surprise as the much-awaited hike was awaited.

Mumbai: RBI Governor Shaktikanta Das on Wednesday announced that the central bank has raised the repo rate by 50 bps to 4.90%. The announcement was made following a three-day meet of the Monetary Policy Committee.

The repo rate is still below pre-pandemic levels, RBI Governor Shaktikanta Das said as he pointed out that the MPC is unanimous in its decision to gradually withdraw exceptional housing during the pandemic situation.

The central bank has also decided to raise MSF Rate and Bank rate to 5.15% from 4.65%.

Das said the real GDP growth rate has been retained at 7.2%. Detailing the global challenges, the Governor said that the Indian economy remains resilient and the economic recovery has accelerated despite the ongoing war and pandemic. However, inflation increased and a large part of this can be attributed to the lack of supplies due to the war.

The hike in rates for the second time in two months comes as no surprise as the much-awaited hike was awaited. A total of 17 of the 41 economists who participated in the Bloomberg poll announced an increase of 50 basis points from the MPC – one-hundredth of a basis point percentage – while the other 11 expected an increase of 40 basis points.

The previous hike in repo rate and reverse repo rate is already reflected in loans and mortgages. The country’s largest home loan company HDFC has increased its retail prime lending rate, at which the adjustable-rate home loan benchmark, by 35 basis points (including 5 basis points on Tuesday).

ICICI Bank has increased the marginal cost of funds based lending rate or MCLR (the minimum rate at which they can issue loans) by 30 basis points.

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