RBI hikes short term lending rates and Cash Reserve Ratio by 25 basis points
merisarkar news service
New Delhi, April 20, 2010
Repo, Reverse Repo, CRR hiked by 0.25 per cent: D. Subbarao
In a bid to contain the inflation the Reserve Bank on India has tightened the money supply in the market. The RBI on Tuesday increased short-term lending and borrowing rates by 25 basis points (0.25 per cent).
The central bank also effected the same amount of increase in the quantum of money that banks need to set aside - Cash Reserve Ratio.
Experts feel, the move is aimed at controlling the inflation.
Repo rate, the rate at which banks borrow money from the RBI, is increased to 5.25 per cent from 5 per cent earlier. Reverse Repo rate, the rate at which banks park their excess liquidity with the RBI, is increased to 3.75 per cent from earlier 3.5 per cent.
Cash Reserve Ratio - the amount banks need to kept aside - is increased by a quarter percent to six percent.
The hike in CRR will come into effect from 24th April. Experts believe that it will suck the liquidity worth Rs 12,500 crore from the banking system.
However, some banks have indicated that they may not pass the increase on to their customers immediately.
