RBI Credit Policy : RBI hikes Interest rates , Loans going to be higher interest

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Indian Central Bank

The new RBI Credit Policy announced on 20th April 2010 hiked the Repo rate ie., the rate at which RBI lends to banks by 25 basis points to 5.25% from 5%. The Reverse Repo rate or the rate at which RBI borrows money from banks was also raised 25 basis points from 3.5% to 3.75% effective immediately. The RBI also raised the Cash Reserve Ratio of Banks ( CRR of Banks ) i.e., the amount of reserves that banks have to set aside with RBI by 25 basis points from 5.75% to 6%. Through this RBI aims to drain INR 125 Billion of excess liquidity from Banking system.

The immediate effect of RBI Credit Policy Hike of Interest Rates is that the commercial banks will increase the Lending rates. This will increase the loan rates. This sure is going to put more burden on the Indian Middle Class population.

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