Shri Sudesh Sonthalia. President, Merchants’ Chamber of Commerce has voiced his concern over the increase in Repo rate by 50 basis point to 7.25 and its Reverse Repo rate by 0.50 basis point to 6.25 under the Liquidity Adjustment Facility (LAF) today by RBI which are more than expected by 0.25 basis. It has been done with the sole purpose to tame inflationary spiral prevailing in the economy.
He expressed that it would definitely going to harden the interest rate further and will impact adversely on floating home loans, EMIs on personal and car loans as these hikes are going to step up the cost of borrowing further. He is of the opinion that current inflation induced by supply-side constraints would not be much effective by monetary policy modulation. This is an indication that interest rates may firm up in commercial banks in the coming months and increase cost of borrowing in the long run.
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