RBI Raises Repo Rate by 40 bps to 4.40%

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RBI Raises Repo Rate by 40 bps to 4.40%
05 May 2022
min read

News Synopsis

The Central Bank's Monetary Policy Committee (MPC) unanimously voted at an off-cycle meeting on Wednesday to raise the repo rate by 40 basis points (bps) to curb inflation growth for some time. The repo rate has been raised for the first time since August 2018.

After a surprising move, the repo rate is 4.40%, with immediate effect. As a result, the Standing Deposit Facility (SDF) interest rate will be adjusted to 4.15% and the Marginal Standing Facility (MSF) rate and bank rate are 4.65%.

However, MPC has decided to continue focusing on neglecting adjustments so that future inflation can maintain its target while supporting growth. RBI has also raised the bank's cash reserve ratio by 50 basis points to 4.5% of net demand and time liabilities (NDTL) in two weeks starting May 21, 2022. This is expected to result in a liquidity adjustment of Rs 87,000 crore discharged from the system.

The RBI's increase in CRR is consistent with its attitude towards the withdrawal of accommodation and is consistent with previous announcements of a multi-year gradual withdrawal of liquidity.

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