Mumbai:As widely expected, the Reserve Bank on Wednesday hiked the policy repo rate by 25 basis points to 6.50 per cent, with immediate effect, in a bid to contain inflation which has been above its tolerance level.
The decision was taken by the Monetary Policy Committee (MPC) of the central bank by a majority of 4 members out of the six.
Repo rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds.
With the hike in repo rate, the standing deposit facility (SDF) rate is revised to 6.25 per and marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.
This is the sixth time interest rate has been hiked by the Reserve Bank of India (RBI) since May last year, taking the total quantum of hike to 250 basis points.
This was the first monetary policy statement by the RBI of the year. The RBI had revised the repo rate by 0.35 percentage points to 6.25% in December last year.
The increase in repo rate is set to push up loan EMIs for consumers.
The RBI projected India’s growth to slow down to 6.4 per cent in the fiscal year 2023-24 from the current financial year.
RBI Governor Shaktikanta Das said the policy rate at 6.5 per cent is still behind the rate of pre-pandemic level.
He also said that though the inflation will moderate in the next fiscal but will remain above the 4 per cent level.