Repo rate raise by 40 basis points RBI's decision

Association Finance Minister Nirmala Sitaraman has given her most response on the Reserve Bank of India's choice to expand the repo rate on May 4. The Finance Minister said that I was not astounded by the RBI raising the arrangement loan cost, however the planning of the rate climb resembled a shock.She said that people felt that this work should have been done somehow. Shockingly, this choice was taken in two gatherings of the Monetary Policy Committee (MPC). Also she said that after the last meeting, the central bank had given indications that the time has come to do some work on inflation. In such a situation, this time RBI took this decision in sync with the rest of the world's central banks.

This move of the RBI is expected to increase the interest rates in the banking system. Equated monthly installment (EMI) on home, vehicle and other personal and corporate loans is expected to increase. Deposit rates, mainly fixed tenure rates, are also set to rise.

Following the sudden announcement by the central bank chief, the S&P BSE Sensex fell 953.83 points (1.67 per cent) to 56,022.16 at 2:18 pm while the Nifty 50 287.65 points (1.69 per cent) to 16,781.45. In his speech, Das said the central bank had announced its motive to withdraw the liberal stance at the last meeting of the MPC last month.

The RBI governor said global tensions are forcing inflation to rise in major economies. Said crude oil price is volatile and above $100 per barrel. RBI Governor Shaktikanta Das said that the reason for the shortage of edible oils is the conflict in Europe and restrictions imposed by exporters.

Repo rate is the interest rate at which the central bank lends short-term financing to banks. Since February 2019, the RBI has reduced the repo rate by 250 basis points to help the economy recover. The Monetary Policy Committee has long been conducive to promoting growth.