RBI Announcement: RBI has decided to increase the repo rate by 40 basis points to 4.40 percent.
RBI Hike Repo Rate & CRR: RBI Governor Shaktikanta Das has announced an increase in Repo Rate and CRR (Cash Resrve Ratio), surprising everyone.
RBI has decided to increase the repo rate by 40 basis points to 4.40 per cent, while increasing the CRR i.e. cash reserve ratio by 50 basis points from 4 per cent to 4.50 per cent.
What is the meaning of increasing repo rateÂ
Repo rate is the rate at which RBI provides loans to banks. That is, on taking loan from RBI, banks will now have to pay 4.40 percent interest instead of 4 percent. When banks have to pay more interest, then obviously they will give loans to their customers at higher interest.
That is, the effect of increasing the repo rate will be that in the coming days, from the government to private banks of the country, from home loans to car loans, personal loans, education loans and the loans given to the corporate world,
they will also charge more interest for that. So the EMI of the old loan you are running on will become expensive. Let us tell you that RBI increases the repo rate to control inflation.
Increasing CRR means that
inflation is increasing continuously. The major reason for this is being considered to be more cash in the market. Which is working to increase inflation. This is the reason why the RBI has decided to increase the CRR by 50 basis points in order to absorb the existing more cash with the banks.
Banks will have to deposit 4.50 percent of the total deposits with the RBI as CRR. That is, the existing excess cash in the banking system will be reduced. So banks will now provide loans after thinking carefully.
Let us tell you that RBI does not even pay interest to banks on the CRR that banks have to keep with RBI. The hike in CRR will be applicable from May 21.
