Your home and car loans would turn dearer as the Reserve Bank of India (RBI) on Wednesday raised the repo rate – the rate at which banks borrow from the central bank- by 0.5% (50 basis points) to 4.9 per cent.
The move was on expected lines as the RBI has already said that the focus would now shift to controlling inflation. In fact, in the coming months, interest rates could be increased further.
Several lenders both private and public including HDFC, Punjab National Bank and ICICI Bank among others have already raised interest rates and are expected to increase them further.
India’s retail inflation soared to 7.79 per cent in May– an eight-year high.
Analysts said that while the move is aimed at containing inflation this may dent economic growth prospects at a time when global uncertainties and risks have surged amid the Russia-Ukraine war.
Earlier, RBI governor Shaktikanta Das said in an interview that the expectation of an interest rate increase in June was a "no-brainer".
In May, the RBI in an unscheduled meeting had unexpectedly hiked interest rate by 40 basis points.
Hit by high inflation the Narendra Modi government has slashed excise duty on fuel besides banning wheat and sugar exports.
A report by the State Bank of India noted that the latest inflation numbers revealed that while in the rural areas, the impact has been disproportionately higher for food prices, the urban areas are hit by surge in fuel prices.
