Hours after the Reserve Bank of India (RBI) hiked benchmark lending rates on Wednesday, Bank of India increased repo based lending rate to 5.50% with immediate effect.
In an exchange filing on Wednesday, the lender said, "The revision is on account of upward revision in Repo Rate announced by RBI, today, in its monetary policy."
Bank of India raised repo based lending rate by 25 basis points to 5.50% and effective repo based lending rate from 8.10% to 8.35%, while mark up rate remains the same at 2.85%.
In a statement issued by the RBI's Monetary Policy Committee (MPC) on Wednesday, the central bank raised the benchmark lending rates by 25 basis points, first hike since February 2023 amid growing inflation concerns. The decision was taken unanimously by the MPC members.
After the MPC decision, the repo rate has increased from 5.25% to 5.5%, is line with expectations, with 60% of economists polled by Reuters had estimated a quarter-percentage point rate hike.The Standing Deposit Facility (SDF) rate stands at 5.25%, while the Marginal Standing Facility (MSF) rate and Bank Rate were hiked to 5.75%.
While releasing the statement, RBI Governor Sanjay Malhotra said rate cuts are "off the table" in the near future amid the external headwinds and mounting inflation concerns. The rate-setting panel will only hold the rates, or decide on increasing them, depending on how the macroeconomic conditions evolve, he said.
Malhotra further explained, concerns around inflation has also worsened due to the El Nino phenomenon, which led to deficient rainfall. The dry Monsoon season not only impacted the Kharif crop, but also poses threat to the Rabi sowing season. This could aggravate food inflation, which has been the primary driver of consumer price index-based inflation in recent months.
In terms of GDP, central bank's updated economic projections, highlighting a more optimistic outlook for the fiscal year. The RBI has revised its overall GDP growth forecast for FY27 upward to 7.1%, a notable increase from the earlier estimate of 6.7%.
Breaking down the fiscal year, the RBI expects strong momentum in the upcoming quarters. The growth projection for the second quarter has seen a significant boost, raised to 7.2% from the previous 6.4%. Similarly, the Q3 forecast has been upgraded to 6.9% from 6.5%, while the estimate for the fourth quarter remains unchanged at 6.8%.
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