What could be more painful for Middle Class consumers in India ? After sky rising Inflation, it’s RBI who is sucking more blood out of the body slowly and slowly. One side the Central bank is saying that they are more towards making the Banking services friendly to customer, another side they are making it tougher for consumer to get banking loan tougher.
Reserve Bank of India has hiked the Key lending rates 12th times in a row within 5 Months in this year itself. This time the Key lending Rates by RBI i.e. Repo Rate , Reverse Repo Rate by 0.25 basis point, which will not ease the inflation in true sense. Had it been the way to check the inflation, It would have been solved initially.
Currently the short-term borrowing (reverse repo rate ) are 8.25 per cent , where as short-term borrowing (reverse repo) rate at which banks park their funds with the RBI increased to 7.25 per cent.
This increase in key lending rates by RBI will directly or indirectly pass on to consumer to bear on. All the loan like Housing Loans, Auto Loans etc will get costlier.
What are the Repo and Reverse Repo Rate ?
REPO RATE are Repurchase agreement (also known as a repo or Sale and Repurchase Agreement) allows a borrower to use a financial security as collateral for a cash loan at a fixed rate of interest i.e in easy definition Repo rate is the rate at which commercial banks borrow rupees from RBI. A small reduction in the repo rate will help banks to get money at a cheaper rate.
REVERSE REPO RATE are rate at which Reserve Bank of India (RBI) borrows money from banks and paid interest on their funds. Due to increase in Reverse repo rate there will be scarcity of funds because banks has to keep more fund with RBI for better interest. It helps the money to be drawn out of the banking system.
I don’t know whether these hike will help in easing the inflation or not but it has definitely brought the pain in the eye of million existing loan consumers who have to pay more EMI now.In my view the best way to check the inflation is to restrict the outflow of money, less the money, there will be less demand and hence no inflation.
