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On Wednesday, the Monetary Policy Committee(MPC) in an off-cycle meeting with the central board, put forward an important decision.
As a result of which, RBI has raised its key lending rate by 40 basis points to 4.40% with immediate effect.
It has also hiked the cash reserve ratio by 50 basis points.
According to the RBI governor ShaktiKanta Das, the decision was taken in view of rising global inflation, high crude oil prices, geopolitical tensions, and a general shortage of commodities.
All of which are greatly impacting the Indian economy, which, according to the RBI governor, is at risk of global spillovers.
It should be noted that this is the first repo rate hike since August 2018.
Obviously, this will increase the cost of borrowing for corporate entities as well as individuals.
A major impact of this decision would be imminent on the fast-rising startup wave that has engulfed the country since the pandemic.
In the address, the RBI governor has also forecasted that food inflation is expected to continue in wake of global wheat shortages.
There is already a global shortage of edible oils due to the export restrictions on Russia, one of the biggest exporters of Palm oil in the world.
In fact, the global inflation has also forced US federal reserve to increase the benchmark lending rate by 0.5% to tackle the situation.
Private banks in India will soon be following suit, by increasing their individual benchmark lending rates.
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