RBI hikes Repo, CRR rates by 25 bps; keeps Bank Rate unchanged
20 Apr 2010
The Reserve Bank of India (RBI) today announced an increase the repo rate under the Liquidity Adjustment Facility (LAF) for banks by 25 basis points from 5.0 per cent to 5.25 per cent with immediate effect. The reverse repo rate under the LAF has also been raised by similar percentage points from 3.5 per cent to 3.75 per cent, with immediate effect.
Cash reserve ratio (CRR), or the percentage of the net demand and time liabilities (NDTL) scheduled banks have to keep in reserve, has been increased by 25 basis points from 5.75 per cent to 6.0 per cent effective the fortnight beginning 24 April 2010.
RBI, however, decided to retain the Bank Rate unchanged at 6.0 per cent on the basis of the current assessment of the monetary situation and in line with the policy stance of easing liquidity while keeping price level under check.
The CRR hike would absorb about Rs12,500 crore of excess liquidity from the system, RBI said in a release.
RBI said it would continue to monitor macroeconomic conditions, particularly the price situation, closely and take further action as warranted.
The increase in the borrowing rate for banks as also the hike in reserve ratio are expected to be interest neutral for banks and contain inflationary expectations while at the same time helping to sustain the recovery process, RBI said.
