Lagatar24 Desk
New Delhi, May 4: The Reserve Bank of India (RBI) increased its key lending rate by 40 basis points to 4.40 percent with immediate effect on Wednesday. The cash reserve ratio was also increased by 50 basis points by the central bank. The monetary policy committee (MPC) made the decision during an off-cycle meeting with the central board on May 2-4.
The CRR increase will take effect on May 21. This is the first rate hike since August 2018 and the first time the MPC has raised the repo rate without warning (the rate at which banks borrow from the RBI).
The MPC agreed unanimously to raise interest rates while remaining accommodating. While inflation has remained above the target of 6% since January, Das predicts that the April figure will be high as well.
The retail inflation rate in March came in at 6.9%. The MPC decision, according to the governor, reversed the May 2020 interest rate drop by an equal amount.
On May 22, 2020, the central bank altered its policy repo rate, or short-term lending rate, in an off-policy cycle to boost demand by decreasing the interest rate to a historic low of 4%.
The statement comes only days after the Reserve Bank of India’s Central Board of Directors had its 595th meeting. The RBI’s central board approved Rajiv Ranjan’s nomination as a member of the MPC on Monday. Mridul Saggar, who retired on April 30, was replaced by Ranjan.
