The Central Reserve Bank has increased the repo rate by 0.40 percent. After this hike, the repo rate has gone up to 4.4 percent. Apart from this, the Reserve Bank’s Cash Reserve Ratio (CRR) has also been increased. CRR refers to the bank deposits that banks need to keep with the central bank in cash.
CRR has been increased by 0.50 percent to 4.5 percent. This increase will be effective from May 21. This will reduce the cash in banks by Rs 87,000 crore. The increase in cash reserve ratio will come into effect from May 21.
Explain that the Reserve Bank has increased the repo rate by 0.40 percent to 4.40 percent. This is the first hike in the repo rate since August 2018. Similarly, this is the first instance when the MPC has raised interest rates by holding a meeting without any scheduled programme. Earlier, the central bank had revised the repo rate on May 22, 2020 without any schedule.
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Under this, with the intention of increasing demand, the repo rate was brought down to the lowest level of four percent. Repo is the rate at which banks take loans from RBI to meet their immediate needs.