While announcing the findings of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das stated that the repo rate, or prime lending rate, has increased by 50 basis points to 5.90%.
Since May, the central bank has increased the repo rate four times, bringing it most recently to 5.90%. The most recent change in the repo rate was done to keep inflation within the desired range.
Five out of the six members of MPC voted in favour of raising the repo rate. When announcing the increase in the repo rate, Das highlighted that it was not just the need to control inflation levels that had inspired the move, but also the unfavourable behaviour of other central banks around the world, particularly those in developed nations.
Das said, "The world has witnessed two major shocks– COVID-19 pandemic and the Ukraine conflict. Now, we are in the midst of a third major shock arising from monetary tightening and aggressive communications from advanced countries’ central banks."
He added that despite high prices and concerns about a global recession, the economy has remained resilient and announced the RBI's pullback from its accommodative stance.
This change was made as analysts projected a 50 bps increase in the repo rate as a result of world events. This week, IIFL Founder and Chairman Nirmal Jain told Business Today TV's Udayan Mukherjee that the short-term lending rate, also known as the repo rate, may increase by another 50 basis points because the RBI has increased the repo rate by 140 basis points since May.
The EMI for personal, auto, and home loans is also likely to increase with an increase in the repo rate. Loan rates will rise when the cost of borrowing for banks increases, increasing the cost of home, vehicle, and personal loans.
Additionally, the Indian stock markets opened on a cautious note in anticipation of Shaktikanta Das' pronouncement of the Monetary Policy Committee's (MPC) decision. The Nifty50 opened at 16,818.10 while the Sensex opened 0.28 per cent lower at 56,251.19 On the other side, early trading saw the Indian Rupee increase 14 paise to 81.59 against the US Dollar.
