THE SHORT term lending rates have been hiked by Reserve Bank of India along with borrowing rates by 25 basis points each on Tuesday, April 20. In order to check inflation, the RBI has also hiked the portion of money banks deposit with it by 25 basis points.
RBI on Tuesday raised the repo, reverse repo rates to 5.25 and 3.75 per cent, while Cash Reserve Ratio (CRR) has been fixed at 6 per cent as expected by the banking analysts. The CRR hike will take effect from April 24 and it will lead to absorption of around 12,500 crores of excess cash in the system.
It will however not lead to increase in the rate of bank loans as it is expected that there is sufficient liquidity in the system. RBI has also pegged the GDP growth at 8 per cent, while inflation at whole sale rate has been calculated to remain at 5.5 per cent.
RBI also said that containing the inflation at 3 percent was it's primary medium term goal and the bank will adopt a calibrated policy to check it. The bank also reassured that it will keep a close watch on rising prices and if necessary more corrective action will be taken.
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