India: RBI hikes benchmark lending rate by 50 basis points to rein in inflation

On Friday, the Reserve Bank of India (RBI) raised the benchmark lending rate by 50 basis points to 5.90 per cent in a bid to check inflation, which has remained above its tolerance level for the past 8 months.

With the latest hike, the repo rate — the short term lending rate at which banks borrow from the central bank — is now close to 6 per cent.

This is the fourth consecutive rate hike after a 40 basis points increase in May, and a 50 basis points hike each in June and August. In all, RBI has raised benchmark rates by 1.90 per cent since May this year.

The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das decided in favour of the rate hike.

The Consumer Price Index (CPI) based inflation, which RBI factors in while fixing its benchmark rate, stood at 7 per cent in August. Retail inflation has been ruling above the RBI's comfort level of 6 per cent since January this year.

Das retained the inflation projection at 6.7 per cent for the current fiscal while slashing real GDP growth estimate to 7 per cent from an earlier forecast of 7.2 per cent for FY'23.