After a sharp hike in petrol prices, there's more negative news in the offing. The Reserve Bank of India today hiked the repo rate by 0.25 percentage points to 8.25 per cent.
Repo rate is the rate at which banks borrow money from RBI. When the repo rate increases, borrowing from RBI becomes more expensive. Hence, all loans - personal and corporate - are likely to become costlier and home loan EMIs will increase once banks hike their base rate - the rate to which most retail loans are pegged.
The hike in repo rate was along expected lines. In a poll of bankers and economists by NDTV, 85 per cent said the RBI will hike rates by 0.25 per cent while only 15 per cent believed that there will be no hike this time.
This is the 12th time, since March 2010, that the RBI has raised interest rates, making it the longest rate hike cycle in nearly a decade. The RBI has been increasing interest rates in a bid to contain rising inflation and at 9.78 per cent, inflation for the month of August hit a 13-month high .
The reverse repo rate - the short term borrowing rate - has now moved up from 7 per cent to 7.25 per cent. The cash reserve ratio (CRR) - the amount of funds that the banks have to keep with RBI- remains unchanged at 6 per cent.
Repo rate is the rate at which banks borrow money from RBI. When the repo rate increases, borrowing from RBI becomes more expensive. Hence, all loans - personal and corporate - are likely to become costlier and home loan EMIs will increase once banks hike their base rate - the rate to which most retail loans are pegged.
The hike in repo rate was along expected lines. In a poll of bankers and economists by NDTV, 85 per cent said the RBI will hike rates by 0.25 per cent while only 15 per cent believed that there will be no hike this time.
This is the 12th time, since March 2010, that the RBI has raised interest rates, making it the longest rate hike cycle in nearly a decade. The RBI has been increasing interest rates in a bid to contain rising inflation and at 9.78 per cent, inflation for the month of August hit a 13-month high .
The reverse repo rate - the short term borrowing rate - has now moved up from 7 per cent to 7.25 per cent. The cash reserve ratio (CRR) - the amount of funds that the banks have to keep with RBI- remains unchanged at 6 per cent.
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