New Delhi: ICICI and PNB Bank made lending costlier by increasing their lending rates after the repo rate hike on Friday (August 5). Reserve Bank of India (RBI) increased repo rate by 0.50 basis point on Friday to stop runaway inflation and defend Indian rupee. The new repo rate is 5.40%. The effects of RBI move have begun to spill over the common people as borrowing loans become costlier and tougher. ICICI bank has increased its external benchmark lending rank (I-ELBR) to 9.10% to align with the rising repo rate. The new lending rate was effective from August 5.
Similarly, PNB has raised its repo-linked lending rate (RLLR) to 7.90 from 7.40. The new rate will be effective from August 8. The state-owned bank said that it has to make loans costlier after the hike in repo rate by RBI. (ALSO READ: Mass layoffs! Alibaba bids goodbye to nearly 10,000 employees due to this reason)
RBI monetary policy hiked repo rate which was third consecutive increase since May. The decision has been taken against the weak economic condition, high inflation, and declining rupee. As mentioned earlier, RBI left the accommodative monetary policy stance, which was taken to boost economic growth post covid-19, to control inflation and stabilise rupee. (ALSO READ: Paytm Q1 results: Net loss widens 69% Year on Year, revenue jumps 89% YoY)
RBI has adopted contractionary policy to make borrowing harder and decrease money supply from the market and consumers. Experts suggest that RBI will hike repo rate more in future up to 6%. It will eventually make lending more costly and tougher. Inflation is still high and above than upper ceiling level of 6%.