Mumbai, October 7 (TNA) The Reserve Bank of India (RBI) on Wednesday raised the policy repo rate by 25 basis points to 5.5 per cent, citing growing inflationary pressures and heightened global economic uncertainty. The decision was taken unanimously by the six-member Monetary Policy Committee (MPC).
This is the RBI’s first repo rate hike since February 2023. The central bank raised the rate to 5.25 per cent as it stepped up its focus on containing inflation driven by higher energy and food prices.
Global Inflation Risks
RBI Governor Sanjay Malhotra said global inflation is projected to increase sharply, prompting central banks across the world to tighten monetary policy. He said escalating energy costs, rising food prices and volatility in global markets had worsened the inflation outlook.
The RBI also changed its monetary policy stance from “neutral” to “calibrated tightening”, signalling that interest-rate cuts are unlikely in the near term. Future policy decisions will depend on the movement of inflation, economic growth and other macroeconomic indicators.
Impact on Borrowers
The repo rate is the interest rate at which the RBI lends money to commercial banks. An increase in the rate generally raises borrowing costs for banks and may lead to higher interest rates on home loans, personal loans and other forms of credit.
The move is expected to support the RBI’s efforts to anchor inflation expectations, although it may also increase repayment pressure on borrowers with loans linked to floating interest rates. The central bank said it would continue to closely monitor domestic and global developments while taking calibrated steps to maintain price stability and support sustainable economic growth.