Editor's Pick: RBI lifts loan costs to tame inflation

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday raised the benchmark lending rate by 25 basis points (bps) to 6.5% in a bid to tackle inflation. In the last monetary policy released in December 2022, repo rate was increased by 35 basis points (bps) to 6.25%. A basis point is one-hundredth of a percentage point. “The MPC was of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break the persistence of core inflation and thereby strengthen the medium-term growth prospects,” RBI Governor Shaktikanta Das said. The MPC also lowered its consumer price index (CPI) inflation forecast for the current fiscal year to 6.5% from the 6.7% that was projected in the December meeting, and growth estimate for Q1 of the fiscal year beginning in April was raised by 70 bps to 7.8%. Two of the panel’s six members voted against the majority decision to raise rates. Mr. Das also defended the Indian banking system and said that the Adani stock rout will not impact it. “At this point of time, I would like to say that the Indian banking system, including the NBFC sector, continues to be resilient and strong. Based on our assessment, the large exposure guidelines of the RBI have been fully complied with by all the banks. The strength, the size and the resilience of the Indian banking system is now much larger and much stronger to be affected by an individual incident or a case,” he said. While the RBI Governor insisted that when it comes to inflation, “the worst is behind us”, he added that RBI could not take off its eyes from the threat. The direct impact of the increase in repo rate will make loans and EMIs costlier. The Hindu’s Editorials Bench and bigotry: On advocate Victoria Gowri’s appointment as Madras High Court judge Old rivalry, new goal: On India-Australia Test series for Border-Gavaskar Trophy The Hindu’s Daily News Quiz Former England player Gary Ballance is only the second Test batter to score a century for two countries. What country does he currently play for? Zimbabwe South Africa West Indies Australia To know the answer and to play the full quiz, click here. [logo] Editor's Pick 09 FEBRUARY 2023 [The Hindu logo] In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( RBI lifts loan costs to tame inflation The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday [raised the benchmark lending rate by 25 basis points]( (bps) to 6.5% in a bid to tackle inflation. In the last monetary policy released in December 2022, repo rate was increased by 35 basis points (bps) to 6.25%. A basis point is one-hundredth of a percentage point. “The MPC was of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break the persistence of core inflation and thereby strengthen the medium-term growth prospects,” RBI Governor Shaktikanta Das said. The MPC also lowered its consumer price index (CPI) inflation forecast for the current fiscal year to 6.5% from the 6.7% that was projected in the December meeting, and growth estimate for Q1 of the fiscal year beginning in April was raised by 70 bps to 7.8%. Two of the panel’s six members voted against the majority decision to raise rates. Mr. Das also defended the Indian banking system and said that the Adani stock rout will not impact it. “At this point of time, I would like to say that the Indian banking system, including the NBFC sector, continues to be resilient and strong. Based on our assessment, the large exposure guidelines of the RBI have been fully complied with by all the banks. The strength, the size and the resilience of the Indian banking system is now much larger and much stronger to be affected by an individual incident or a case,” he said. While the RBI Governor insisted that when it comes to inflation, “the worst is behind us”, he added that RBI could not take off its eyes from the threat. The direct impact of the increase in repo rate will make loans and EMIs costlier. 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