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RBI Hikes Key Interest Rates Again, Bad News for Loan Borrowers

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New Delhi: The Reserve Bank of India (RBI) on Wednesday increased the benchmark lending rate by 50 basis points (bps) to 4.90 percent to contain inflation. The benchmark lending rate has remained stubbornly above the target of 6 percent for the last three months.

Repo is the rate at which the Reserve Bank of India lends funds to commercial banks when needed. It is a tool that the central bank uses to control inflation. The reverse repo rate is the rate at which the RBI borrows from banks. The repo rate currently stands at 4.90 percent – while the reverse repo rate is at 3.35 percent. Reverse repo rates have remained unchanged since May 2020.

The central bank had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting the interest rate to a historic low of 4 percent.

The Standing Deposit Facility and Marginal Standing Facility rates were raised by 50 basis points. The Standing Deposit Facility rate is now 4.65 percent, and the Marginal Standing Facility rate is now 5.15 percent.

GDP growth forecast for FY23 remained at 7.2 percent. GDP growth is forecast at 16.2 percent for April-June. GDP growth is forecast at 6.2 percent for July-September. GDP growth is forecast at 4.1 percent for October-December. GDP growth is forecast at 4.0 percent for January-March 2023.

(Vinayak)