RBI announces hike of repo rate by 25 bps

Mumbai, Mar 30 (UNI) In a surprise move, the Reserve Bank of India (RBI) today raised its short-term lending rate, the repo rate, by 25 basis points to 7.75 per cent with immediate effect.

It also raised its cash reserve ratio (CRR) by half a percentage point. The CRR will rise to 6.50 per cent in two tranches, the first on April 14, 2007, and the other on April 28, 2007. The CRR hike will drain Rs 15,500 crore from the banking system.

''In the light of the current macroeconomic, monetary and anticipated liquidity conditions, as well as with a view to containing inflation expectations, it is critical to take demonstrable and determined action on an urgent basis,'' RBI said in a statement issued here today.

RBI has also decided to cut interest rate on bank's CRR balance deposited with it from one per cent to 0.5 per cent with effect from April 14, the release added.

UNI