RBI Raises Interest Rates by 0.25%
In a bid to check near double-digit inflation, the Reserve Bank of India (RBI) has increased interest rates by 0.25 percentage point, reported BBC.
It was second rise in a month and is in line with what analysts forecast.
According to report, the repo rate – the rate at which the central bank lends to commercial banks – was hiked from 5% to 5.25%.
While the cash reserve ratio – the percentage of banks’ deposits they must keep in cash – was increased to 6% with a view to drain money in the financial system, report said.
Besides, the RBI raised the reverse repo – the rate it pays to banks for deposits – to 3.75%, said report.
“Developments on the inflation front are worrisome,” RBI governor Duvvuri Subbarao was quoted as saying in a statement. “With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments.”
The inflation has been rising sharply over the last few months, from 0.5% in September to 9.9% in March, its highest in 17 months.
