RBI Hikes Repo rate By 40 Basis Points

Reserve Bank of India (RBI) on Wednesday raised the key interest rate by 40 basis points to 4.40 percent with immediate effect.

RBI governor Shaktikanta Das said that the decision was taken by the monetary policy committee (MPC) of the central bank in its off-cycle meeting held between May 2-4.

He said the decision was taken in view of rising inflation, geopolitical tensions, high crude oil prices and shortage of commodities globally, which have impacted the Indian economy.

What is Repo Rate?

Repo rate is the rate of interest at which commercial banks borrow money from the central bank i.e. Reserve bank of India (RBI). In the case of inflation, RBI increases the repo rate, and in the case of deflation decreases it. RBI increases the repo rate to remove the excess supply of the money out of the market.

Also Read: New RBI Rules for Credit and Debit Cards Effective July 2022