RBI hike interest rates, loan EMIs to shoot up

HYDERABAD: RBI Governor Shaktikanta Das headed six-member Monetary Policy Committee (MPC) hiked the repo rate by 50 basis points — 0.5 per cent — to 5.90 per cent to control stubborn inflation which remain above comfort level of the central bank. This is the fourth straight increase in the current cycle, and will lead to an increase in EMIs that borrowers on various kinds of loans.

RBI had slashed the repo rate in March, 2020 to cushion the impact of Covid-induced lockdown, and maintained status-quo in the benchmark rate for almost two years till May 2022. Since its first unscheduled mid-meeting hike in May, the RBI has raised its key rate by a total 190 basis points.

Apart from the stubborn inflation, the central bank was forced to hike the repo rate because of the adverse global economic environment, which led to strengthening of the US dollar against other currencies.

Though the Indian rupee too weakened against the US dollar, RBI governor Shaktikanta Das said high frequency data for the second quarter indicate that economic activity remains resilient, private consumption has been holding up. He said rural demand is also gaining gradually, investment demand picking up, agriculture sector remains resilient.