Mumbai: Home loans and other borrowings will become costlier with the Reserve Bank of India hiking its key policy rate by 25 basis points. The increase did not come as a surprise as it was in line with economists’ forecasts.
Announcing the decision of the Monetary Policy Committee (MPC) on Wednesday, reserve Bank of India Governor Shaktikanta Das said that the repo rate has been increased from 6.25% to 6.5%. Almost all floating rate loans, including home loans, are linked to the RBI’s repo rate, which is the rate at which it lends to banks.
The hike is good news for depositors as an increase in lending rates would mean that banks would have more leeway to offer higher returns without sacrificing their margins. Das said that as a result of the rate hike, the real policy rate (the rate adjusted for inflation) has moved into the positive zone.
The governor said the budget would support growth despite the weak global situation. While inflation is expected to moderate in FY24, it is likely to remain above the 4% target. He said the outlook is cloudy due to geopolitical tensions and volatility in crude oil prices. Das said that the GDP growth in FY24 is expected to be 6.4%.
“The MPC will continue to monitor the evolving economic outlook to align it with the target. The inflation rate in the fourth quarter is estimated to be 5.7 percent. The MPC is focused on the return of inflation,” Das said.
Das said economic activity remains resilient and urban activity is strengthening, especially in services – travel, tourism and hospitality with domestic air passenger traffic surpassing pre-pandemic levels. “Several high-frequency indicators also point to strengthening activity.
“Investment activity continues to gain traction. The total flow of resources to the corporate sector increased to Rs 20.2 lakh crore from Rs 12.2 lakh crore a year ago.
Announcing the decision of the Monetary Policy Committee (MPC) on Wednesday, reserve Bank of India Governor Shaktikanta Das said that the repo rate has been increased from 6.25% to 6.5%. Almost all floating rate loans, including home loans, are linked to the RBI’s repo rate, which is the rate at which it lends to banks.
The hike is good news for depositors as an increase in lending rates would mean that banks would have more leeway to offer higher returns without sacrificing their margins. Das said that as a result of the rate hike, the real policy rate (the rate adjusted for inflation) has moved into the positive zone.
The governor said the budget would support growth despite the weak global situation. While inflation is expected to moderate in FY24, it is likely to remain above the 4% target. He said the outlook is cloudy due to geopolitical tensions and volatility in crude oil prices. Das said that the GDP growth in FY24 is expected to be 6.4%.
“The MPC will continue to monitor the evolving economic outlook to align it with the target. The inflation rate in the fourth quarter is estimated to be 5.7 percent. The MPC is focused on the return of inflation,” Das said.
Das said economic activity remains resilient and urban activity is strengthening, especially in services – travel, tourism and hospitality with domestic air passenger traffic surpassing pre-pandemic levels. “Several high-frequency indicators also point to strengthening activity.
“Investment activity continues to gain traction. The total flow of resources to the corporate sector increased to Rs 20.2 lakh crore from Rs 12.2 lakh crore a year ago.