RBI tightens policy to tame inflation,loan rates may not go

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RBI tightens policy to tame inflation,loan rates may not go

Postby admin » Tue Apr 20, 2010 12:04 pm

Aiming to tackle near double-digit inflation, the Reserve Bank today hiked key lending and borrowing rates, as also the mandatory cash reserves banks park with it, by 0.25 per cent.

But lenders said the move would not lead to any immediate increase in commercial and personal loan rates.

The RBI increased repo and reverse repo, the rates at which it lends to and borrows short-term money from banks, by 25 basis points.

It also hiked CRR, the portion of money that commercial banks deposit with the central bank, by an identical percentage - a move that would suck out Rs 12,500 crore from the system. The increase would come into effect on April 24.

Commenting on RBI's annual monetary policy for 2010-11, Finance Minister Pranab Mukherjee said, these measures "should have a gentle impact on tightening money in the economy and should dampen further inflationary pressure.
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