New Delhi: The Reserve Bank of India (RBI) has increased interest rates by 50 fundamental points. This is the fourth consecutive increase in policy interest rates since May. With this decision of the central bank, the easy monthly installments (EMIs) of home, auto and other loans will increase. The Monetary Policy Committee (MPC), which consists of three members from the RBI and three from outside, has reduced the key repo rate to 5.90 per cent. This is the highest level of repo rate since April 2019. The decision to increase interest rates was approved by the members 5-1.
At the same time, the central bank has lowered the economic growth forecast for the current financial year 2023 from 7.2 percent to 7 percent, while the retail inflation rate has been forecast to be 6.7 percent.
“The MPC has decided to increase the repo rate by 0.50 per cent to 5.9 per cent,” RBI Governor Shaktikanta Das said in a statement. The central bank has taken this step to bring retail inflation under control and deal with the pressure created by the steep increase in the interest rate of central banks of different countries. Repo is the rate at which the central bank lends to commercial banks. An increase in this means that the loan will be costlier and the monthly instalment of the existing loan will increase.
This is the fourth time that the policy rate has been increased. The RBI has retained the retail inflation forecast for the financial year 2022-23 at 6.7 per cent.