New Delhi, June 08:
The Reserve Bank of India on Wednesday increased the repo rate by 50 basis points to 4.90%. The current repo rate is 4.40% after the rates were increased by 40 basis points at an off-cycle meeting of the Monetary Policy Committee. The repo rate remains still below the pre-pandemic level, RBI Governor Shaktikanta Das said as he explained the MPC is unanimous in its decision to gradually withdraw the extraordinary accommodation during the pandemic situation.
The central bank has also decided to raise MSF Rate and Bank rate to 5.15% from 4.65%.
The real GDP growth has been retained at 7.2%, Das said. Giving an overview of the global challenges, the governor said the Indian economy has remained resilient and the economic recovery gained momentum despite the ongoing war and the pandemic. However, inflation increased and a large part of it can be attributed to supply shortage because of the war.
Inflation has been projected at 6.7% for the current year, Das said. Earlier it was projected at 5.7%.
The rate hike, the second in two months, does not come as a surprise as the increase was highly anticipated. A total of 17 of the 41 economists who participated in a Bloomberg poll expect the MPC to announce a rate hike of 50 basis points – one basis point is one-hundredth of a percentage point – while another 11 expect an increase of 40 basis points.
The last hike in the repo rate and the reverse repo rates are already reflected in loans and mortgages. HDFC, the country’s largest home loan company has increased its retail prime lending rate, on which adjustable-rate home loans are benchmarked, by 35 basis points (including by 5 basis points on Tuesday). ICICI Bank has raised the marginal cost of fund-based lending rate or MCLR (the minimum rate at which they can issue loans) by 30 basis points.
Linking credit cards to UPI
The RBI on Wednesday proposed to allow the linking of credit cards to the UPI platform to provide additional convenience to the users. In the beginning, Rupay credit cards will be linked to the UPI platform. As of now, the UPI platforms are linked to debit cards. “UPI has become the most inclusive mode of payment in India with over 26 crore unique users and five crore merchants on the platform. The progress of UPI in recent years has been unparalleled. Many other countries are engaged with us in adopting similar methods in their countries,” Shaktikanta Das said.
