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

Tags: National Economy/Finance Latest Popular

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.

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