RBI hikes REPO rates

RBI hikes REPO rates

RBI hikes REPO rates

In its recent Monetary Policy Committee meeting, Reserve Bank of India hiked its REPO Rates. The MPC unanimously voted to increase the policy repo rate by 50 basis points to 4.90% and keep policy stance ‘withdrawal of accommodation’. Real GDP forecast for FY23 has been retained at 7.2%. After May’s surprise 40 basis-point off-cycle hike, Shaktikanta Das and co were widely expected to hike the rates again in this monetary policy meet.

Here are the highlights of the MPC meeting Here are the highlights

  • Policy repo rate hiked by 50 basis points to 4.90%
  • Policy stance to remain ‘withdrawal of accommodation’
  • Real GDP forecast for FY23 retained at 7.2%
  • RBI revises inflation projection for FY23 to 6.7% from 5.7% earlier
  • Additional measures announced for cooperative banks
  • Credit cards, starting with RuPay credit cards, can now be linked to UPI
  • E-mandate on cards for recurring payments, limit upped from Rs 5,000 to Rs 15,000 per transaction.

Note : Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

Description: In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

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