Money & Banking

RBI hikes repo, reverse repo by 25 basis points

PTI Mumbai | Updated on March 17, 2011

rbihor   -  PTI

The RBI Governor, Mr D Subbarao. (file photo)   -  Business Line

The Reserve Bank of India today raised its short-term lending and borrowing rates for the eighth time since March 2010 by 25 basis points in a bid to rein in inflation.

The short-term lending rate (repo) has been increased from 6.5 per cent to 6.75 per cent, while the short-term borrowing rate (reverse repo) has been raised to 5.75 per cent from 5.5 per cent.

Increase in rates by the RBI is expected to make loans, including housing, auto and corporate loans, dearer.

Keeping in view the liquidity situation, the central bank has kept the Cash Reserve Ratio (CRR), the amount which lenders are required to keep with the RBI in cash, unchanged at 6 per cent.

It has raised the inflation projection to 8 per cent for March-end against 7 per cent estimated earlier.

“After a slight moderation in January, headline WPI inflation reversed in February 2011 accompanied by a sharp increase in non-food manufactured products inflation,” the RBI said in its mid-quarterly review.

The overall inflation increased marginally to 8.31 per cent in February 2011 from 8.23 per cent a month ago.

The policy initiatives, the RBI said, are aimed at reining in demand-side inflationary pressures and contain the spill over of food and commodity price hike to other sectors.

It further said that the central bank would continue with its policy to contain the rate of price rise.

“Based on the current and evolving growth and inflation scenario, the Reserve Bank is likely to persist with the current anti-inflationary stance,” it said.

Published on March 17, 2011

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