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Why RBI increases Repo rate by 25 BPS this time, decoded by Pradeep Natani. All time loans are getting more expensive.

By: Nisha Gupta0 comments

Your most of loans are linked to external benchmark, the most commonly used benchmark is repo rate which has been increased by 25 BPS by RBI leading to total costing of 6.50%

Repo rate, also known as the repurchase rate, is the interest rate at which a central bank (such as the Reserve Bank of India or the Federal Reserve) lends money to commercial banks. The commercial banks, in turn, use this money to meet their short-term funding needs.

When the central bank raises the repo rate, borrowing from the central bank becomes more expensive for commercial banks. This makes it more difficult for them to access short-term funding, which, in turn, curbs inflation. On the other hand, when the central bank lowers the repo rate, borrowing becomes cheaper for commercial banks, making it easier for them to access short-term funding, which can stimulate economic growth.

In summary, the repo rate is an important monetary policy tool used by central banks to manage the supply of money in an economy and regulate inflation. Contact munafawala for loan consultancy in jaipur

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