Bank Loans may get costlier now. The Reserve Bank of India (RBI) on Wednesday raised the repo rate the rate at which banks borrow cash from it against government securities -- to 7.5 per cent, up by 25 basis points.
The higher cost of borrowing for banks is likely to push up interest rates across the board. Loans to buy a house or a car or any personal loan may become more expensive. Shopping through credit cards may also pinch.
The hike in the repo rate and other measures announced along with it by the RBI are a clear attempt to rein in inflation and the runaway growth in the personal-loans portfolio of banks.
In his statement on the third quarterly review of monetary policy, RBI Governor Y.V. Reddy said the objective was to keep the inflation rate between 5 and 5.5 per cent this financial year.
REDDY'S BRIEFCASE
REPO RATE
Raised by 25 basis points to 7.50 per cent Liquidity to tighten to tame inflation
REVERSE REPO RATE
Unchanged at 6 per cent
BANK RATE
Unchanged at 6 per cent
CASH RESERVE RATIO
Kept steady at 5.50 per cent
INFLATION
The RBI said its objective is to bring inflation as close as possible to 5.0-5.5 per cent as soon as possible
MONETARY STANCE The RBI said its monetary stance would be to ensure price stability and anchor inflation expectations
GLOBAL FACTORS The RBI said it would respond swiftly to evolving global, domestic situation impacting inflation, growth
BANK LOANS Banks have to keep two paise for every rupee given to real estate, capital market, personal loans (excluding housing), against credit cards and to NBFCs. Rates for these are expected to rise
From: HT, 01-02-07
