Repo hike will not make loans costly: Govt

Amid speculations that home and personal loan rates may go up, the government today said that the 0.25% hike in repo rate is not intended to make loans costlier but to make banks self-sufficient for lending.

"It (repo rate hike) is not intended to make loans expensive," Minister of State for Finance P K Bansal said responding to a query on whether loans would become costlier after the revised repo rate yesterday.

Bansal said the increase in repo rate is intended to contain inflation and manage liquidity.

Raising the repo rate is only a signal that getting liquidity from the RBI would be expensive, RBI Governor Y V Reddy said after releasing the annual policy review statement yesterday.

RBI wants banks to lend to the extent of their own resources mobilised through deposits and not be aggressive in lending to non-productive sectors.