The Reserve Bank of India monetary policy committee led by Urjith Patel, increased the central bank's interest rate by 25 basis points. It means the rate at which the commercial banks in India borrow loans from Reserve Bank of India is increased from 6% to 6.25%.
RBI raised the repo rate after 4 and half years. The consumer price index or inflation, surging crude oil price depreciation of rupee, increase in private consumption expenditure and closing output gap are cited as the main driving force for this decision of Reserve Bank of India monetary policy committee.
If there is increase in interest rates for lending than definitely the interest rate for deposit will also increase. So it is a good news for pensioners and old people whose main income is interest from bank deposits. Definitely it is a good news for savers in our country.
On the other hand the interest rate of house loan and other loan rates will increase. Even before the increase in repo rate, SBI, ICICI, Punjab National Bank have already increased their marginal cost of funds-based lending rate. As the interest rate for lending is increased, the Small and Medium Scale (SME ) industries will definitely be affected. They are already bitten by Demonetization and teething trouble of GST.