RBI Raises Lending Rate; Auto and mortgage EMIs to rise: The Tribune India
New Delhi, May 4
In an unexpected move, the Reserve Bank of India (RBI) on Wednesday raised the repo rate, the rate at which it lends to commercial banks, by 40 basis points (bps) to 4.40% in a bid to contain the inflation which has crossed 6% for three consecutive months. As a result, EMIs for home, auto and other loans are likely to increase.
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This is the first rate hike since August 2018, as well as the first instance of the RBI Governor-led Monetary Policy Committee (MPC) holding an unscheduled meeting to raise interest rates.
The RBI has also raised the cash reserve ratio (CRR) by 50 basis points to 4.5%, which will force banks to park more money with the central bank and leave them with less to lend to consumers. . The increase in the CRR will be effective from 21 May.
This would suck Rs 87,000 crore of liquidity from the banking system, RBI Governor Shaktikanta Das said while announcing the decision. Rampant inflation due to rising commodity prices and high freight rates due to the conflict in Ukraine caused rates to rise, Das said. The announcement sent stock markets plummeting, with the Sensex registering nearly 1,300 points and Nifty 400 points.
The move will increase borrowing costs for businesses and individuals, but it would also mean higher interest rates on term deposits.
Pradeep Multani, president of the PHD Chamber of Commerce and Industry, said that although the move was aimed at tackling inflationary pressure, it would hurt consumer and business sentiment. Rising rates will impact the growth of the real estate sector and could affect housing demand, according to industry players. CREDAI Chairman Harsh Vardhan Patodia said, “We are seeing growth trends in real estate. Although rising rates will affect consumer purchasing power, we believe the impact will be felt by homebuyers. »
This will hurt consumer sentiment: experts
- PHDCCI’s Pradeep Multani: Rising rates will hurt consumer and business sentiment
- Will hurt real estate sector growth and affect housing demand, experts say
- CREDAI: will have an impact on the purchasing power of consumers