Congress fails to explain how RBI rate hike will benefit people

Congress today faced an awkward situation when asked how the recent decision of the Reserve Bank of India (RBI) to raise its key interest by 0.5 percentage point would tame price rise and benefit common man.

"We hope the price rise will come down," party spokesperson Shakeel Ahmed said when quizzed by reporters whether the RBI's decision would not increase the EMIs for home and auto loans.

The Reserve Bank on Tuesday raised its short-term lending and borrowing rates by 0.5 per cent to 8 per cent and 7 per cent respectively, a decision which would make home, auto and personal loans expensive.

Quoting Finance Minister Pranab Mukherjee, Ahmed said 8 per cent food inflation was unacceptable and the government and the central bank were taking steps to check rising prices.

Hike in interest rate by the RBI, he said, was one of the steps which was taken by the central bank to contain rate of price rise.

The headline inflation, which also include the rate of price rise of food items, was 9.4 per cent in June, much above the RBI's comfort level of 5-6 per cent.

When pressed further, Ahmed shot back saying "this is not a place for cross examination".

In its bid to check rising prices, the RBI for the 11th time since March 2010 raised the interest rates. Following the announcement, several smaller banks have increased their lending rates making home and auto loans dearer.