As expected, RBI hikes key rates by 25bps

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RBI hikes key rates by 25bps
Mumbai, Apr 20: As expected, the Reserve Bank of India (RBI) has yet again hiked the key rates by 25 basis points in an attempt to suck out the excess liquidity from the system and to fight inflation.

The central bank on Tuesday, Apr 20 hiked repo rate to 5.25 per cent from 5 per cent. Repo rate is the interest charged by the RBI on borrowings by commercial banks.

The reverse repo, the rate at which the central bank borrows money from commercial banks, has been revised to 3.75 per cent from 3.5 per cent.

The Cash Reserve Ratio (CRR) was tightened by 25 bps to 6 per cent from 5.75 per cent in RBI's new credit policy.

While the Repo and Reverse Repo rates hike come into effect immediately, the CRR hike will be effective from Apr 24.

An international new agency had earlier reported that most economists expected the central bank to continue tightening monetary policy at a gradual pace to drain out the liquidity from the banking system and to contain rising inflationary pressures.

Even in Mar 2010, the RBI hiked repo and reverse repo rates by 25 basis points.

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