US slaps Imran Khan on wrist

US slaps Imran Khan on wrist

US hints Imran Khan is doing the wrong thing in trying to bring down Nawaz Sharif govt...
No table for three

No table for three

Narendra Modiís gamble wonít work unless Delhi gets act together on J&K, border management...

Raghuram Rajan's RBI effects 25 bps repo rate hike, turns EMIs on loans dearer

Sep 20 2013, 18:02 IST
Comments 0
RBI Raghuram Rajan listens to a question during a news conference after the mid-quarter monetary policy review, in Mumbai. Reuters RBI Raghuram Rajan listens to a question during a news conference after the mid-quarter monetary policy review, in Mumbai. Reuters
SummaryEMIs on auto, home and other loans are set to go up after Raghuram Rajan hikes repo rate.

EMIs on auto, home and other loans are set to go up after RBI Governor Raghuram Rajan unexpectedly raised the repo rate by 0.25 per cent after a gap of almost two years to keep inflation under check, sending the stock markets into a tizzy.

Contrary to the expectations of the industry and experts, Raghuram Rajan in his maiden policy review opted for a hawkish monetary stance ahead of the festive season instead of shifting the focus to growth promotion by lowering interest rates to generate demand.

Read Full Report: Raghuram Rajan's mid-quarter monetary policy review

Read Full Statement: Raghuram Rajan's mid-quarter monetary policy review

RBI policy graph Sept 20

The repo rate, or the short-term lending rate, has been increased by 25 basis points to 7.5 per cent from 7.25 per cent with immediate effect. Other policy rates will be adjusted accordingly. The RBI previously raised the repo rate in October 2011 by 0.25 per cent to 8.5 per cent.

RBI Governor Raghuram Rajan, however, took steps to ease liquidity through a reduction in the marginal standing facility (MSF) rate, at which banks borrow from the central bank, by 0.75 per cent to 9.5 per cent and a lowering of the minimum daily maintenance of the cash reserve ratio (CRR).

After the policy was unveiled, State Bank of India Chairman Pratip Chaudhuri said lending and deposit rates will go up in view of the rise in festive season demand.

Raghuram Rajan, however, did not indicate that banks would raise lending rates, saying the cut in the MSF rate would balance the impact of the repo rate hike.

"I hope that they (banks) will look at their cost of funding...to make a decision and not look at the future and try and anticipate some hypothetical cost," he added.

Following the policy announcement, the benchmark BSE Sensex tanked by as much as 595 points, while the rupee depreciated 69 paise to 62.46 against the dollar.

*Stocks: Top Gainers/Top Losers

Raghuram Rajan said the elevated level of retail inflation is worrisome and leaves no room for complacency, while wholesale price inflation will be higher than initially anticipated.

Retail inflation was at 9.52 per cent last month. Wholesale price inflation rose to a six-month high of 6.1 per cent in August, driven by costlier

Single Page Format
Ads by Google

More from FE editor's picks

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...