RBI’s Monetary Policy Committee (MPC) began 3-day meeting on Monday, 4 June amid speculations that key interest rates may be hiked for the first time after four-and-half years on account of firming prices of crude oil and high inflation.
The policy review meeting of the six-member MPC, headed by RBI Governor Urjit Patel, is currently underway. The policy decision will be announced on Wednesday afternoon.
Even before India’s Monetary Policy Committee decides to hike interest rates, corporates and retail borrowers have seen borrowing costs rise. Should the MPC decide to increase the policy rate now, the cost of funding could rise further, said money market experts.
Key Interest Rate to Go Up?
The current repo rate stands at 6 percent.
The 7-quarter high GDP growth rate of 7.7 percent in the January-March quarter of 2017-18 and forecast of a normal monsoon have reduced the clamour for a cut in the benchmark lending rate (repo).
Retail inflation, a key data for RBI, has remained above 4 percent since November 2017. Besides, oil prices have been rising for the past few months. While petrol in Delhi costs Rs 77.96 a litre, diesel is at Rs 68.97 per litre.
The government has mandated the RBI to restrict the retail inflation at 4 percent (with a margin of /- 2 percent), while supporting growth.
Indicating hardening of the interest rate scenario, several major lenders including SBI, PNB and ICICI Bank have already raised their lending rates from 1 June. Some of the banks have also increased the deposit rates.
RBI Monetary Policy Committee Begins 3-Day Meet
RBI’s Monetary Policy Committee (MPC) began a 3-day meeting on Monday.
The six-member MPC, headed by RBI Governor Urjit Patel, is meeting for three days for the first time instead of the usual two days due to some administrative exigencies.
The resolution of the second bi-monthly monetary policy meeting in the current financial year, 2018-19, will be made public on Wednesday afternoon.
It was in January 2014 that the RBI had last raised the short-term lending rate (repo) to 8 percent; since then it has either reduced it or maintained status quo.