RBI hikes key rates by 25 bps to tame inflation

Written by: Samyuktha
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Mumbai, Jul 3: Efforts to contain inflation continue as the Reserve Bank of India (RBI) on Friday, Jul 2 hiked the key policy rates, repo and reverse repo, by 25 basis points.

The hike with immediate effect has taken the repo rate, which is the interest rate at which the RBI lends to banks, up to 5.50 per cent, and reverse repo rate, which is the rate paid by the RBI to banks for deploying surplus funds, stands at 4 per cent.

The central bank's move comes just a day after banks applied the new base rate-linked lending system on Thursday, Jul 1. Analysts suggest that the bank may not hike their lending rates immediately. However, it is likely that the deposit rates will rise.

Earlier, in its Annual Policy in Apr 2010, RBI had raised the repo and reverse repo rates by 25 basis points each to 5.25 per cent and 3.75 per cent respectively.

The Reserve Bank's latest move comes three weeks ahead of its first quarter review of monetary policy, which is scheduled for Jul 27.

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