Reserve Bank of India moves up Indian Interest rates

India's Central Bank hikes its Repo Rate . Commercial Banks move up their lending and Deposit rates . Is it a beginning of a new Journey ?
MYSORE, India - May 17, 2022 - PRLog -- During the first week  of this  month , Indian Monetary Authority the Reserve Bank of India  left   hiked   its Repo Rate by 0.40 %   to 4.40 %  in a surprise  move . It follows  spite   of rising retail inflation and wholesale price index in last few months .

Repo Rate  is the rate at which the Reserve Bank of India lends money to commercial banks in the event of shortfall of funds .  Though   the market was   anticipating such   hike in coming months  , the move was sudden and taken   in a   special meeting of RBI's Monetary  Policy  Committee   held in the first week unexpected  . .

As a   result , borrowing and deposit of commercial bank with  interest rate   directly linked to benchmark repo rate  moved automatically up   .  Further MCLR  ( Marginal Cost of Fund Based  Lending Rate )  was raised by many banks  in response to RBI move .

Now many   leading  banks   have begin to alter the interest rates paid by them   to their customers  . The banks include  Public Sector lender State Bank of India  ( SBI ) for  bulk deposits  and many Private  sector   lenders  and public sector banks for retail  deposits . The altered rates  are little higher than the present rates by 0.10 % pa to 0.40 %   pa .

Now as many as  seven  banks  are paying 7% pa or more  to their senior citizen customers  even for  a short duration of one year    .

The inflation    figure  released  by the government of India   for the month of April 2022 subsequent to RBI's  move  on  interest rates   is  on the upward trend only  . Hence many  analysts  are feeling that  the first hike By RBI after 4 years   is only the  onset of a  new northward journey of Indian interest rates  .

We have to wait and see whether  the  RBI move is sufficient to tame the inflation   or RBI has  hike again in their next MPC meeting in the next month .


Manjunathan Bellur
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Location:Mysore - Karnataka - India
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