RBI hikes repo rate for first time in 2 years; lending rate up by 40 bps, CRR hiked by 50 bps, Auto News, ET Auto

New Delhi: In an emergency meeting, the Reserve Bank of India (RBI) on Wednesday raised the repo rate by 40 basis points to 4.40%, Governor Shaktikanta Das said. RBI hiked the cash reserve ratio also by 50 basis points to 4.5%.

Repo is the rate at which the central bank lends short-term funds to banks. The RBI has cut the repo rate by 250 basis points since February 2019 to help revive the growth momentum.

The monetary policy committee (MPC) voted unanimously to hike the repo rate to 4.40%. One basis point is one hundredth of a percentage point. The MPC decision is to maintain the accommodative stance.

Citing inflationary pressures, the RBI governor said that global oil prices are holding above USD 100 a barrel and are feeding into local fuel prices. Geopolitical tensions are pushing inflation, the RBI Governor said after the unscheduled MPC rate review meeting.

“Nine out of the 12 food subgroups registered an increase in inflation in March. High-frequency price indicators for April indicate the persistence of food price pressures,” Das added.

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The address by the governor comes ahead of the US Federal Reserve outcome as it is likely to hike rate to address record inflation in the country.

The Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, left the interest rate unchanged and maintained an accommodative stance. This implies that the central bank may go for more rate cuts in future if needed to support the economy. According to Das, MPC voted unanimously to leave the repo rate unchanged and to keep an accommodative stance.