RBI Interest Rate: Reserve Bank increased the policy interest rates

New Delhi:

repo rate 2022: The Reserve Bank has increased the interest rates for the first time in four years in view of the rising inflation, especially of food items.

It is expected that banks may soon increase their loan rates, which will increase the EMI of home loan, auto loan, personal loan.

RBI has reduced the repo rate from 4 to 4.40 percent.

Whereas the Cash Reserve Ratio (CRR) has been increased from 4.5 to 5 per cent.

The RBI has made this sudden increase apart from its fixed-period monetary review policy.

This sudden move of the central bank was shocking for the market.

However, in view of the high level of inflation, during the last 2-3 monetary reviews, there were chances of a hike in interest rates, although it did not happen.

The Monetary Policy Committee (MPC) took this decision during a meeting with the Central Board between 2-4 May.

Repo rate is the interest rate on short-term loans to banks notified by the Reserve Bank.

An increase in the repo rate simply means that the cost of credit for the bank will increase.

Banks can bear the burden of this by increasing the interest rates of loans given to customers.

Its direct effect is sure to increase the EMI of your home, vehicle and personal loan.

In such a situation, commercial banks and NBFCs can soon announce an increase in interest rates.

Experts say that this new loan will put more burden on the borrowers.

At the same time, the EMI of existing borrowers, especially those who have taken loans at flexible interest rates, will also increase.

RBI Governor Shaktikanta Das had indicated during the last monetary policy review meeting that the era of low interest rates was going to end soon.

He has cited the impact of factors such as the Russo-Ukraine war, high crude oil prices, worldwide shortage of raw materials on the Indian economy.

If we talk about the change in the repo rate, then it has happened after two years i.e. May 2020, whereas if we talk about the increase in interest rates, then it has happened after four years. 

Banks may soon announce an increase in their interest rates, which will make all types of loans costlier.