RBI hikes key rates, all loans to become more expensive

All loans, including auto, home, personaland other corporate borrowings, are expected to cost more with RBI raising keyinterest rates sharply for the third time in the last three months, by 0.50 percent, to tame inflation on Tuesday. 

With a 50 bps hike, the repo rate (at whichthe RBI lends to banks) would be 8 per cent and the reverse repo rate (at whichit borrows from banks) to 7 per cent. However, the cash reserve ratio (CRR),the amount all banks need to park with RBI, remains unchanged at 6 per cent.

Read how you can deal with rising interest rates and still get that loan

In its quarterly review of the monetarypolicy, the central bank has also revised its fiscal-end inflation projectionto 7 per cent from 6 per cent earlier. It has retained the growth project forthe current fiscal at 8 per cent.

The industry has expressed itsdisappointment over the sharp increase in interest rates, saying the move wouldharm the investment sentiment.

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