Monday 02 October 2023 - 3:10:05 pm

India's Central Bank raises repurchase rate by 50 basis points

New Delhi, 30th September 2022 (WAM) -- India’s Central Bank, the Reserve Bank of India (RBI), today raised its repurchase rate by 50 basis points, which will impact the economy and investors in diverse ways.

The repurchase rate, commonly known as "repo" rate is a technical banking term, which refers to the interest rate at which commercial banks borrow short-term money from the RBI by selling their securities to the Central Bank.

With the latest increase, the repo rate now stands at 5.9 percent. This is the fourth increase since May and has totalled 190 basis points. One basis point equals 1/100th of one per cent.

The increase in repo rate is expected to lead to an increase in interest rates. Short-term and medium-term bank depositors are especially expected to benefit from higher returns. On the flip side, taking loans from banks will become dearer.

The steady increase in repo rate is also expected to impact the domestic real estate market as buying property will become costlier, especially borrowings at floating rate.

The RBI’s intentions in hiking the repo rate are to contain inflation and to reduce liquidity in the economy.

WAM/Krishnan Nayar

WAM/Tariq alfaham