Government of India is trying all the steps to restrict the rising Inflation rate that has been touched 6.46% now. The Reserve Bank of India has decided to make money costlier in the market.

To restrict the inflow of money in the financial market, the RBI has decided to increase the inter-bank short-term lending rate (repo) by 0.25% to 7.75% that would result in raising the benchmark interest rate.

Further, the RBI is also set to increase credit reserve ratio by 0.5% to 6.50%. This would squeeze money out of the banking system by forcing banks to deposit an extra Rs 15,500 crore with RBI.

These steps may also be proved as hurdles in the way of economic growth in the country. But, according to the report, the government is very much concerned to restrict the inflation rate. This has become the top priority for the economic analysts sitting in the governance. The RBI has said that growth had now become a secondary concern. Controlling inflation is the central bank’s top priority.

The decision would force banks to increase home loan rates by at least half a percentage point and it would go to 11.50% now. It would be applicable for the customers who are already paying home loan EMIs at floating rates. On the other hand, the Interest rates on personal and commercial loans would go up by the same amount.

If we see the previous history of hiking the interest rates in Home loans, we find that the banks have increased home loan rates from 6.5% to 11% in last 2 years and so. It has resulted in the equated monthly instalments increasing by 43%.

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