Guwahati: The Reserve Bank of India (RBI) raised the benchmark repo rate by 50 basis points (bps) to 4.90 percent on Wednesday in an effort to curb the country's surging inflation.

This is the central bank's second consecutive hike in two months, and it is likely to increase borrowing costs for corporations and people. In May, the RBI raised the repo rate by 40 basis points in an off-cycle move in response to mounting inflationary pressures in India.

The repo rate is the interest rate at which banks borrow from the RBI. An increase in this rate implies an increase in borrowing rates across the board.

The rates for the standing deposit facility (SDF) and the marginal standing facility (MSF) were raised by the same amount, to 4.65 percent and 5.15 percent, respectively.

The government has entrusted the RBI with maintaining CPI-based inflation at 4% with a 2% margin of error on each side.

It bases its monetary policy decisions mostly on consumer price index (CPI) inflation.

The latest rate rise was supported by all six members of the Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das.

The RBI has increased its inflation prediction for the current fiscal year to 6.7 percent from 5.7 percent previously.

According to the latest forecast, inflation would likely continue over the central bank's maximum tolerance range of 6% during the first three quarters of 2022-23.

Inflation is expected to stay around 7.5% in the first quarter of the current fiscal year. It is expected to be 7.4 percent in the second quarter. It is expected to be 6.2% in the third quarter.

With a typical monsoon in 2022 and an average crude oil price in the Indian basket of 105 dollars per barrel, the RBI Governor estimated inflation at 6.7% in 2022-23.

"Limits on individual home loans provided by urban cooperative banks and rural cooperative banks, which were last established in 2011 and 2009, respectively, have been raised upwards by more than 100% to account for increases in house values. It will improve the flow of financing to the housing industry "he stated.

The Reserve Bank maintained its GDP growth prediction for the current fiscal year at 7.2 percent but warned of negative spillovers from geopolitical tensions and a global economic downturn.

In announcing the third monetary policy of 2022-23, RBI Governor Shaktikanta Das stated that the available data for April and May 2022 show that the domestic economic recovery continues solid, with growth impulses becoming more broad-based.

The May purchasing managers' indexes (PMIs) for manufacturing and services hint at a continuing increase in activity.

Das observed that geopolitical concerns, increasing international commodity prices, rising input costs, tightening global financial conditions, and a global economic downturn continue to weigh on the forecast.

"Taking all of these variables into account," the governor added, "real GDP growth for 2022-23 is maintained at 7.2 percent, with Q1 at 16.2 percent, Q2 at 6.2 percent, Q3 at 4.1 percent, and Q4 at 4.0 percent, with risks largely balanced."

According to the National Statistical Office's preliminary projections announced on May 31, India's GDP growth in 2021-22 is expected to be 8.7 percent, above the pre-pandemic level of 2019-20.

Credit cards may now be linked to the universal payments interface (UPI), allowing more users to use the popular platform to make payments.

He stated that for the time being, Rupay credit cards issued by the RBI-backed National Payments Corporation of India (NPCI) will be empowered with this feature, and that it will be made available following system enhancements.

Shaktikanta Das stated that the central bank will maintain ample liquidity to support the economy's productive needs.

The RBI will also continue to focus on the timely completion of the government's borrowing programme. "With pandemic concerns in mind, the RBI will guarantee enough liquidity to support the productive needs of the economy," Das said while announcing the monetary policy.