NEW DELHI: The hike in repo and reverse repo rates may affect the cost of borrowings from the banks by the industry, especially, by micro, small and medium enterprises (MSMEs), said the industry chambers.

Mr. Rajan Bharti Mittal, President of the Federation of Indian Chambers of Commerce and Industry (FICCI), said, “This is a huge surprise as general expectation was at most 25 basis points increase in both rates...The reverse repo increase will incentivise parking of funds by banks with RBI thus reducing lending opportunities to industry.”

The rise in reverse repo rate is likely to impact the availability of funds with the banks for extending credit to the industry, as banks would find it more profitable to park funds with the RBI and make it difficult for small corporate borrowers to get loans from the banks. Even, the Federation of Indian Export Organisations (FIEO) has expressed apprehension over the upward change in the interest rate regime.