Hello,
The RBIs monetary policy regulates the money supply in the economy by controlling interest rates(IR) to improve economic growth.
The RBI manages the Repo rate which is the rate at which commercial banks borrow from the RBI and the bank in turn decides its lending rate based on this repo rate.
An increase in IR will harm anyone who has borrowed money from a bank.
When the IR is low, companies borrow money from banks to expand their business and generate larger profits. When there IR is high, companies stall expansion and exercise cost cutting. This also reduces job opportunities and slows down the economic growth.
Companies who borrow money from banks at higher IR are hit by a reduction in profits due to an increase in the interest paid to the banks.
Also, retail investor participation reduces in the market as a higher IR ensures that investor money is parked in fixed return assets such as FDs and even MFs. This reduces overall domestic market participation and slows down economic growth to a larger extent.