In what would make loan EMIs costlier for the borrowers, the Reserve Bank of India (RBI) has decided raise the repo rate for the first time since February 2023. Announcing the outcome of the MPC meeting, RBI Governor Sanjay Malhotra said that the members of the MPC have unanimously decided to hike the repo rates by 25 basis points. Following the RBI’s decision, the repo rate has now been hiked from at 5.25 percent to 5.50 percent.
Standing Deposit Facility rate (SDF) rate stands adjusted at 5.25 percent, and the marginal standing facility range and the bank rate to 5.75 per cent, said Governor Malhotra.
Announcing the RBI policy outcome, Governor Malhotra said, “After a detailed assessment of the evolving macroeconomic and financial conditions, developments and the outlook, the MPC voted unanimously to increase the policy repo rate by 25 basis points”.
Economists had expected an increase in the repo rate for the first time since February 2023. SBI report had recently said that with geopolitical tensions, crude-price risks and global repricing of risks, “it would be prudent for us to rather act pre-emptively than being behind the curve”.
Inflation is becoming increasingly broad-based. CPI inflation rose to 4.82 per cent in August from 4.45 per cent in July. Strong El Nino conditions and below-normal October rainfall could pose further risks to Rabi output. Rising crude oil prices, inflation and higher bond yields globally has narrowed Reserve Bank of India’s room to hold rates unchanged.
RBI policy decision comes against resilient domestic activity. India’s economy grew 7.8 per cent in Q1 FY27. TWorld Bank recently upgraded India’s economic growth forecast for FY27. In its latest South Asia Economic Update, the multilateral institution raised India’s GDP growth projection by 0.5 percentage points to 7.1 percent, from its earlier estimate of 6.6 percent.
