RBI Hikes Interest Rates

The second quarterly policy review of the RBI has hiked the interest rate, cut the marginal standing facility, and provided term repos of seven and 14 days. A hike in interest rates will further squeeze growth as industry will shy away from investing. Experts believe that the impact on inflation will be minimal as food prices, which have contributed most to inflation, has not been impacted by interest rates. The cut in marginal standing facility will ease the situation for banks which are facing an acute fund crunch. While more funds in the system will take the pressure off interest rates. Since there has been no clear indication from banks on whether interest rates will be hiked, its too early to say that EMIs on car and home loans will go up. All eyes are now on Raghuram Rajan.