RBI Hikes Repo Rate

August 2, 2018

The Reserve Bank of India (RBI) has hiked the repo rate again in its bi -monthly monetary policy review. It will be hiked by 25 basis points (bps). Repo rate has now become 6.50%.RBI had increased it by 25 basis points in the previous policy review after four- and- a- half year gap. One basis point is equal to one-hundredth of a percentage.

Repo rate is the rate at which RBI gives loans to other banks. The rate at which the banks lend money to RBI is called as reverse repo rate. The reverse repo rate has now become 6.25%.

An increase in the repo rate means that banks will now increase the interest rate on loans. This happens because the banks’ marginal cost based lending rate goes up (MCLR).

According to the experts, people who are planning to take any loan now, post hike should not wait any longer. It is because the banks had started hiking the interest from before RBI announced hike in the repo rate. Home loan borrowers should compare the rates offered by various lenders before choosing any one.

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