Loans to become costlier

S

sunandaC

Sunanda K. Chavan
Hallabol !

The Reserve Bank of India (RBI) raised interest rates by a quarter of a percentage point, its 12th hike since March last year, to combat near double-digit inflation.

Repo rate is the rate at which banks borrow money from RBI. When the repo rate increases, borrowing from RBI becomes more expensive.

The Reserve Bank of India (RBI) raised its repo rate, at which it lends to commercial banks, by 0.25 basis points to 8.25% and increased the reverse repo -- the rate it pays to banks for deposits -- to 7.25%.

Headline inflation for August rose to 9.78 percent, its highest level in more than a year, data showed on Wednesday.

:target:
 
Let me explain this concept in laymans language:
Two concepts at macro level realry effects the economy its 1. Inflation & Deflation
as u all know inflation is rise in price & viceversa for deflation both effects the national income & economy of the economy.

RBI's role in controling Inflation
Inflation rate is 9.5%u0025 which is high. now RBI has already taken step to curb inflation rate by increasing Bank rate, now whats banlke rate is the rate @ which RBI lends money to banks and that forms the base for all asset products of bank. Now as bank rate increases, automatically interest rate for other asset products increases & supply of money flow in the economy will reduce because demand for loan will decrease because of high rate of interest
 
You must log in or register to reply here.
Back
Top