The Reserve Bank of India has increased the cash reserve ratio (CRR) for banks

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The Reserve Bank of India has increased the cash reserve ratio (CRR) for banks by 0.50 percent to 4.5 percent.

• On May 4, 2022, in the meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India, Reserve Bank Governor Shaktikant Das announced an increase in the CRR.

• In the meeting of the Monetary Policy Committee (MPC), it was decided to increase the repo rate by 0.40 percent to 4.4 percent.

• The new rates will be applicable from May 21.

• What is Cash Reserve Ratio (CRR)?

• CRR refers to the bank deposits that banks need to keep with the central bank in cash.

• What is the repo rate?

• Repo rate is the rate at which the central bank of a country (RBI in India's case) lends money to commercial banks when they are short of funds. Here the central bank buys securities.

• What will be the effect of the hike in repo rate?

• The increase in the repo rate by the RBI will increase the EMI of other loans like home and car loans.

• An increase in the repo rate can help bring down inflation. The Reserve Bank believes that due to the costlier interest rate, the inflation rate will be controlled.

• The impact of increasing the repo rate will also affect the savings bank account and FD. Banks can increase the interest rate on your savings account and fixed deposits.