RBI hikes repo rate by 25 bps to 7.50 per cent
16 Jun 2011
The Reserve Bank of India (RBI) today announced a 25 basis point increase in the repo rate under the liquidity adjustment facility (LAF) from 7.25 per cent to 7.5 per cent with immediate effect.
The repo, or repurchase rate, is the rate at which the RBI repurchases government bonds from banks to cater to their liquidity needs.
The reverse repo rate under which RBI receives deposits from banks also stands automatically adjusted to 6.5 per cent and the overnight marginal standing facility (MSF) rate to 8.5 per cent with immediate effect.
RBI has kept the rate increase at the minimum considering the credit needs of the emerging economy. The current measures are aimed at containing inflation and anchor inflationary expectations by reining in demand side pressures, RBI said.
This should also help mitigate the risk to growth from potentially adverse global developments, including commodity price volatility.
RBI said it would, however, persist with its anti-inflationary stance of monetary policy based on the current and evolving growth and inflation scenario.
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