RBI hikes repo rate: What happens to your EMIs now

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"RBI's Monetary Policy Committee has made a decision to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.5% Consequently, the reverse repo rate under the LAF stands adjusted to 6.25% and marginal standing facility rate and Bank Rate to 6.75%", the apex bank said in a statement.

Standard Chartered Bank chief executive officer (India) Zarin Daruwala said, "The 25 basis points hike reaffirms RBI's commitment to bringing CPI inflation to 4 per cent on a durable basis".

Reverse repo, the rate at which the RBI borrows money from commercial banks within the country, was adjusted to 6.25 per cent.

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In the third bi-monthly monetary policy of the 2018-19, RBI cited various concerns to inflation like volatile crude prices, uncertainty in the global financial market, hardening of input prices for corporates, uneven distribution of rainfall, fiscal slippages and rise in MSP of foodgrains. This the first time since October 2013 that the central bank has hiked borrowing costs at two consecutive policy meetings. This is likely to lead to an increase in the interest bank customers pay on loans, be it home loan, auto loan or personal loan. But in all respects, the central bank's policy statement was anything but neutral.

Though the prices remained below its estimated trajectory, the RBI has forecast retail inflation at 4.6 per cent in the second quarter of the fiscal, 4.8 per cent in the second half of the fiscal and five per cent for the first quarter of 2019-20.

However, the MPC being headed by RBI Governor Urijit Patel has kept their stance neutral.

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Usually commercial banks take cue from RBI's monetary policy stance in hiking or cutting lending rates.

India's annual consumer inflation hit 5 percent in June, the eighth straight month it topped the RBI's medium-term 4 percent target. Five of the six members on the rate panel voted for the rate increase.

The projected inflation rate is above its targeted comfort level of four per cent. The hike was done following inflationary concerns. Based on an overall assessment, it retained its GDP growth projection for 2018-19 at 7.4 per cent.

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