The Reserve Bank of India hiked its basic interest rate by 25 basis points to 6.5 as its announced its monetary policy. The supreme bank hiked the key lending or repo rate for the first time after the Modi government came into power – a key decision in its monetary policy after four years.
The RBI turned to hike the interest rate to have a grip on rising prices in the background of growing oil price globally but it will have its repercussions in the family budget of common man. The interest hike will have a say on housing, motor vehicle interest rates. The RBI had previously hiked the interest rates before January 2014.
Repo rate, the rate of interest at which the RBI charges to lend short term loans to commercial bank, hiked to 6.25 percent from 6 percent. The reverse repo, the rate of interest at which the RBI borrows from banks, also raised to 6 percent.
