9 june 2006

rbi surprises with interest rate hike
in a move, which surprised the markets, reserve bank of india raised the repo and reverse repo rate after market hours yesterday. the rate hike was least expected, especially when the stock markets have seen a severe fall.

reverse repo rate, or the rate at which rbi borrows from the markets to suck out liquidity, has been hiked by 25 basis points from 5.50 per cent to 5.75 per cent.

repo rate, or the rbi lending rate to infuse liquidity into the markets, has also been increased by 25 basis points to 6.75 per cent from 6.50 per cent earlier. the spread between the repo and reverse repo rates have been kept stable at 100 basis points.

bank rate, used as a benchmark rate for fixing interest rates of commercial loans, has been left unchanged at 6 per cent per annum.