RBI Credit Policy: RBI hikes CRR by 25 bps to 8.25 pc

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Sources, April 29: The Reserve Bank of India Governor YV Reddy on Tuesday hiked the cash reserve ratio (CRR) by 25 basic points to 8.25 per cent from 8 per cent while announcing the RBI's Credit Policy. The Credit Policy will be effective from May 24 to control inflation-stoking cash in the system.

However, it kept repo (lending), reverse repo (borrowing) rates unchanged. RBI raises home loan limit to Rs 30 lakhs. The RBI kept its key-lending rate steady at 7.75 per cent and left the repo rate, the rate at which it absorbs excess cash from banks, unchanged at 6.0 per cent.

The central bank is targeting an inflation of 5.5 per cent by March 2009 and is expecting a GDP growth of 8-8.5 per cent in the same period. It forecast economic growth of 8.0 to 8.5 per cent in the fiscal year that began this month, after an estimated 8.7 per cent in 2007/08, and aimed for inflation of 'around 5.5 per cent" this fiscal year but with the goal of lowering it close to 5.0 per cent as soon as possible.

While announcing the policy at the RBI headquarters, the Governor also said that there is more headroom for rate adjustment and the monetary priority is to stabilise prices. He further said, managing liquidity would continue to receive priority in its policy objectives but warned it would act swiftly to curb any signs of "adverse developments" in inflation expectations.

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