After 4 yrs RBI hikes repo rate
The Reserve Bank of India (RBI) hiked the policy repo rate by 25 basis points to 6.25 per cent for the first time in last four years to curb rising inflationary pressures. The move may see home, auto and personal loans get costlier. Loan EMIs may increase if the banks decide to pass on the hike. Financial market participants say that the latest move is the beginning of a rate hike cycle and they expect another 25 basis point hike by the end of this year.
WHAT IS REPO RATE?
It is the rate at which the RBI lends money to commercial banks. The increase in repo rate means that the RBI would charge a higher rate of interest for all the money that it lends to various commercial banks. The bank, in turn, would be forced to charge its borrowers more. The decision on repo rates has wide-ranging implications for businesses and individuals.
NOT A SURPRISE
The hike did not come as a surprise for few as they had a whiff about the move in view of the recent pre-emptive action taken by some of the Asian central bankers to maintain macro-economic stability.
The recent surge in global crude oil prices, sharp depreciation in the currency against the US dollar and the prospects of higher interest rate in the US has threatened the macro-economic stability of many emerging market economies.
CREDIT REGISTRY
In a move that could potentially reduce banking frauds and bad loans in India, the High Level Task Force set by the RBI has recommended the creation of a Public Credit Registry (PCR) backed by a suitable legal framework.
The PCR will be a single point of mandatory reporting for each loan availed by individuals or entities without any threshold in amount. It means even a `10,000 loan from a micro lender would be reported to PCR.
The agency would collect an individuals credit information like utility payments to generate credit history.