RBI credit policy: Home, auto loans to be costly

Home and auto loans may cost more as the RBI raised its short-term lending and borrowing rates by 0.25 percentage points each yet again today with a view to check spiraling prices of essential commodities.

The hike in repo rates will certainly be passed on by the banks to retail and corporate clients which will drive the already high interest rates upwards.

An immediate hike in interest rates is unlikely to happen though. Indian Overseas Bank (IOB) Chairman and Managing Director M Narendra said the RBI measures may not lead to immediate hike in interest rates. "I think rates would remain stable during this month. Beyond March it would depend on various factors like money market, call money rate etc," he said.

The RBI’s rate hike comes after inflation unexpectedly surged in February on rising fuel and manufacturing prices. The RBI has also raised its inflation target for March to 8 per cent from 7 per cent earlier.

The Central Bank has not ruled out further action on the rate front in its next meeting in April. In a statement RBI said," Based on the current and evolving growth and inflation scenario, the reserve bank is likely to persist with the current anti inflationary stance."

This is the eighth time that the RBI has raised rates to tackle high inflation. The Central Bank has raised rates seven times since March 2010, each time by 0.25 per cent.


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