For the first time in four years, the Reserve Bank of India (RBI) on Wednesday hiked Repo Rate by 25 basis points to 6.25 per cent and Reverse Repo rate at 6.50 per cent. The key interest rates were hiked after RBI's three-day-long Monetary Policy Committee (MPC) meet in Mumbai.
"With all the six members voting for an increase in policy rates, the Monetary Policy Committee raised "repo rate by 25 basis points and kept the stance neutral", the RBI said in a statement in Mumbai.
The hike in the repo rate is likely to make the interest rates on loans dearer as it will make borrowing for banks expensive and they may charge higher from customers.
In the second bi-monthly monetary policy for the current fiscal, the RBI projected inflation for 2018-19 at 4.8- 4.9 per cent in the first half and 4.7 per cent in the second half of the year.
The central bank retained the Gross Domestic Product (GDP) growth for the financial year 2018-19 at 7.4 per cent. The Reserve Bank projected India's GDP growth at 7.5-7.6 per cent in the first half and 7.3-7.4 per cent in the second half.
"Gross domestic product (GDP) growth for 2017-18 has been revised and estimated at 6.7 per cent backed by an all-time high production of food grains and horticulture, strengthening of industrial growth and resilient services sector activity," RBI Governor Urjit Patel said in a press conference.