New Delhi: The RBI has raised Reverse Repo and Repo rates by 25 basic points with immediate effect. As a result, the Reverse Repo Rate now stands at 5.75 per cent, while the Repo rate has gone to 6.75 per cent.
The central bank says that the rates have been hiked in view of economic and monetary conditions. Following this rate hike, 10-year bond yield is likely to go up from current 7.67 per cent to 7.8 per cent.
Commenting on this rate hike, the Prime Minister's Economic Advisory Council described the move as not surprising. It said that the rate hike is a reflection of liquidity tightness.
Reacting to the move, Union Bank said that the hike indications were there, as inflation had gone up. It said that if needed, the hike would be passed on to customers as well.
However, Standard Chartered Bank said that no immediate change is expected in home loans and procurement recognition level (PLR) as of now.
But the bankers, at large, have called the move as untimely. According to them, home loan rates are likely to rise by 50 basic points. It means that floating home loan rates could go up from nine per cent to 9.5 per cent. Fixed rate home loans may also rise from 10 per cent to 10.5 per cent.
The voices from the Industry has been quite mixed. Cipla believes that the Reverse Repo rate hike will hinder progress and said that it is a regressive step.
Nicholas Piramal says that following the move short-term borrowing will become costly. However, it doesn't see it having any long-term impact on the economy.
On the other hand, Bharti doesn't find the move surprising, as it sees it in line with international trends.
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