The Central Bank of a country creates a framework for the economy. All the lenders and financing institutions follow the rules and guidelines set by the central bank. Every couple of years the central bank reviews the economy and analyses if their goals are being met or no. These goals are mostly related to keeping inflation in check. If the plan is not on track, they plan and make amends in order to achieve their target.
In India, the central bank is also known as the Reserve Bank of India (RBI). The RBI plans and forecasts banking policies. They recently came into light when they increased the repo rate by 25 basis points. This is the second time in 4 years that the RBI has increased the repo rate. Today the rate stands at 6.50% which is 50 basis points higher than what it was 4 years ago i.e. 6.00%.
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