RBI Hikes Repo Rate For Third Consecutive Times, Highest Since 2019

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On the 5th of August, Friday, the Reserve Bank of India (RBI) raised the benchmark lending rate by 50 basis points to 5.40% to tame inflation.

With the latest hike, the repo rate or the short term lending rate at which banks borrow has crossed the pre-pandemic level of 5.15%. The repo rate is the rate at which the RBI lends money to commercial banks.  Whereas, the reverse repo rate is the rate at which the RBI borrows money from banks.

Notably, after the pandemic situation due to the Wuhan virus also known as the Novel Coronavirus (COVID-19,) this is the third consecutive rate hike after a 40 basis point in May and 50 basis point increase in June.

In all, the RBI has raised the benchmark rate by 1.40% since May this year.  The discussion regarding the revised repo rate was taken during a meeting of all the six members of the Monetary Policy Committee (MPC.)  The committee was headed by the RBI Governor Mr. Shaktikanta Das.  During the meeting, all six members of the MPC unanimously voted for the rate hike.

The MPC meeting was concluded on the 3rd of August, Wednesday. 

Notably, the new rate hike is the highest since 2019.

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