Differences in RBI on making loans costlier! MPC member Jayant Verma raised the repo rate further

RBI MPC On Repo Rate Hike: Now there is a clear difference of opinion among the members of RBI’s Monetary Policy Committee (RBI MPC) regarding making loans more expensive. Professor Jayant R Verma, a member of the RBI Monetary Policy Committee, has advocated not to increase policy rates now. In the meeting of RBI’s Monetary Policy Committee from 28 to 30 September 2022, Professor Verma voted in favor of increasing the repo rate by 50 basis points. But he also emphasized that there should be no increase in interest rates from here on.

After raising the repo rate of RBI, banks made loans expensive but skimped on increasing the deposit rates. Regarding this, Professor Verma said that the increase in policy rates has not been fully implemented in the system. He said that the impact of monetary policy decisions on the economy is yet to be seen. He said that as much as the repo rate has been increased, only one third of its effect has been seen on the increase in deposit rates.

Professor Verma said that the interest rates on the loan have been increased but he believes that the deposit rates have not increased. He said that it may take 5 to 6 quarters to see the effect of RBI’s repo rate hike. He said in the meeting that if the repo rate continues to increase without any realty check, then its wrong effect can be seen.

In fact, in April 2022, after the retail inflation rate was 7.79 percent, the RBI increased the repo rate from 4 percent to 5.90 percent in four phases. Due to which the EMI of the people has become expensive, which has affected the savings of the people.

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