The Reserve Bank of India (RBI) on Tuesday increased the Repo Rate from 7.75% to 8 by a margin of 0.25% in the policy meeting. This is third hike from the new governor of RBI Raghuram Rajan ever since he took the charge. However, RBI backed this move and said to bring down the inflation these measures are essential.

With an increase in Repo Rates, all the centralized banks in the country are likely to increase the interest rates of loans in a day or two. Higher interest rates means lesser number of people will approach the banks for loans and this will ultimately decrease the demand of home and car loans. The main aim of RBI is to control the Inflation which is the highest in the Asian continent itself.

Rupee value depreciated by 14% in the last twelve months which has affected all the commodities in the country. Rise in daily essentials and fuel has hit the common man very hardly and so the union government was made reasonable for it. This irked the common man and in the recent elections, the ruling party faced a terrible defeat.

RBI is aiming to bring the consumer Inflation to 4% by 2016 and so that investments will have smooth flow.

(AW: Vamshi)