RBI hikes repo rate by 25 basis points to 7.5%
In a surprising move, the Reserve Bank of India Governor Raghuram Rajan, in his maiden mid-quarter monetary policy review, hiked the short-term lending (repo) rate to 7.5%, seeking to control inflation. The Cash Reserve Ratio (CRR) was left untouched at 4%.
To ease liquidity, the Marginal Standing Facility (MSF) rate, at which banks borrow from the RBI, was reduced to 9.5% from 10.25% and the minimum daily maintenance of the CRR was lowered to 95%.
In reaction to RBI’s decision the rupee slipped 46 paise to close at 62.23 against the dollar in line with a sharp decline in local stocks.
However, RBI Governor Raghuram Rajan has made his stance clear that RBI wants lower inflation and aims to curb it to 5% mark.