Mumbai:The Reserve Bank of India on Tuesday hiked key policy rates by 25 basis points and the Cash Reserve Ratio (CRR) for banks by 25 basis points. The CRR now stands at six per cent, from 5.75 per cent. The repo rate has been raised to 5.25 per cent from
five per cent while the reverse repo rate has been increased to 3.75 per cent
from 3.5 per cent. The hike in CRR, will absorb 12,500-crore rupees excess cash
from the banking system. Banks have already indicated that they may not pass on
the increased cost to the borrowers immediately as liquidity still remains sufficient
in the system. Assuring that the policy actions would not halt the recovery, the
RBI pegged the FY'11 GDP growth at eight percent. It also pegged the wholesale
inflation, which is currently hovering close to the double-digits, at 5.5 percent
for FY' 11. The bank, however, said it would closely monitor the situation of
price in the economy. The new repo and reverse repo rates are effective immediately,
while cash reserve ration is to take effect from the week beginning April 24.
