The central bank's move came in a bid to tame inflation, price rise and also to suck out excess money from the system. Now, the repo rate, which is the interest charged by the RBI on borrowings by commercial banks, stands revised to 5 per cent while the reverse repo rate, which is the rate at which the central bank borrows money from commercial banks, has been revised to 3.5 per cent.
With the benchmark short-term interest rates hiked, the loan rates are expected to go up in Apr 2010 as the EMI will go up affecting the retail borrower.
This comes amid the soaring inflation numbers. Finance Minister Pranab Mukherjee has also express anguish over the rates and has warned that inflation may return to double-digit levels if steps are not taken to contain the price rise.
The RBI's announcement on the rate hike came after the Indian markets were closed. The move, however, plagued the US markets.