New Delhi: The Reserve Wall of India (RBI) increased the repo rate by 25 understructure points i.e. 0.25 percent, on Wednesday, October 7, tween rising inflationary pressure. With this the repo rate increased from 5.25 percent to 5.50 percent. This is the first time since February 2023 that RBI has increased the repo rate. The six-member Monetary Policy Committee unanimously supported this decision.
Why did the repo rate have to be increased?
While announcing the monetary policy, RBI Governor Sanjay Malhotra cited inflation as the main reason for increasing the rates. Ongoing tensions in West Asia, fluctuations in transplanted oil prices and rising supplies prices have increased inflation risks. Retail inflation rose to 4.82 percent in August, which remained whilom the RBI's 4 percent target for the third subsequent month.
Will your EMI increase?
An increase in repo rate may have an impact on loans taken from banks and other financial institutions. In specimen of an increase in interest rates on home loan, car loan and personal loan, EMI of existing borrowers may increase. However, it is not necessary that this affects every loan immediately or equally. Banks will decide its impact based on their lending rates and loan terms.
Why did RBI transpiration its stance?
Along with increasing the repo rate, RBI has reverted the monetary policy stance from 'neutral' to 'calibrated tightening'. This indicates that the inside wall is currently raising a increasingly stringent stance regarding the risk of inflation. However, the governor clarified that the visualization on any remoter rate hike will depend on the very data of inflation and economic growth.
What happened to SDF and MSF rates?
RBI has kept the Standing Deposit Facility (SDF) rate at 5.25 percent. Whereas Marginal Standing Facility (MSF) and wall rate are at 5.75 percent. There was moreover no transpiration in the Cash Reserve Ratio (CRR) and it remains at 3 percent.
What happened to SDF and MSF rates?
RBI has kept the Standing Deposit Facility (SDF) rate at 5.25 percent. Whereas Marginal Standing Facility (MSF) and wall rate are at 5.75 percent. There was moreover no transpiration in the Cash Reserve Ratio (CRR) and it remains at 3 percent.
Is the risk of inflation looking increasingly serious?
Interestingly, despite increasing the interest rates, RBI has increased the economic growth estimates. The GDP growth estimate for the financial year 2026-27 has been increased from 6.7 percent to 7.1 percent. At the same time, the inflation estimate has been increased from older 5 percent to 5.2 percent. According to RBI, despite strong economic activity, the risk of inflation now looks increasingly serious.
What will be the impact on home buyers?
An increase in the repo rate creates a possibility of an increase in interest rates for new home loan borrowers. At the same time, the EMI or loan tenure of old loans with floating rates may moreover be affected. In such a situation, customers taking loans for home, car or other big purchases will have to alimony an eye on the interest rates of banks in the coming days.
