RBI hikes repo rate by 25 bps to 5.50 per cent

The Reserve Bank of India (RBI) has increased the repo rate under its Liquidity Adjustment Facility (LAF) by 25 basis points, from 5.25 per cent to 5.50 per cent, with immediate effect.

Accordingly, the reverse repo rate under the LAF will also go up by a similar 25 basis points from 3.75 per cent to 4.0 per cent, RBI said in a release.

At the same time, the RBI also decided to extend the additional liquidity support to scheduled commercial banks of up to 0.5 per cent of their net demand and time liabilities (NDTL) by a fortnight, to 16 July from 2 July.

"For any shortfall in maintenance of statutory liquidity ratio (SLR) arising out of availment of this facility, banks may seek waiver of penal interest purely as an ad hoc measure," RBI said.

The second LAF will be conducted on a daily basis up to 16 July 2010, RBI added.

RBI said the measures have been taken in the light of the significant macroeconomic developments since the April 2010 monetary policy statement. While at the global level, the recovery is strengthening, RBI said, uncertainty in the euro area tends to cloud the outlook.