How will the RBI’s shock affect your money, know here
Repo rate hiked by 0.50%
Money supply can be increased overnight, but not purchasable goods which require considerable time to produce. The 0.5 percent hike in the repo rate has two broad implications. Vikram Viswanathan, a SEBI-accredited investment advisor, says new borrowers and long-term retail loans linked to the current repo rate will become costlier.
High return on deposit
The interest rate at which banks borrow will now increase, retail loans like personal loans, auto loans, and home loans will become costlier. Hence, the EMI of new borrowers is going to increase significantly. Bank depositors, on the other hand, will get higher returns on their deposits, depending on how banks handle the new interest rate hikes. These deposits include fixed deposits.
RBI Governor Shaktikanta Das on Friday said consumer price index (CPI) inflation remains “uncomfortably high” and “expected to remain above 6 percent”. but kept unchanged. India’s retail inflation eased for the second month in a row, but declined to just 7.01 percent in June from a year earlier, official data showed on Tuesday. Consumer prices, which rose 7.04 percent in May, continued to breach the Reserve Bank of India’s upper limit of 6 percent for the sixth consecutive month.