Reserve bank of India (RBI) today hiked the short-term lending and borrowing rates and the portion of money banks deposit with it by 25 basis points each.
The repurchase rate (repo), reverse repurchase rate (reverse repo) to 5.25 per cent and 3.75 per cent, respectively. It also set the Cash Reserve Ratio (CRR) to 6 per cent.
The move is aimed at controlling the inflation without affecting growth. The central bank stressed that in the medium term it needs to contain the inflation at 3 per cent. The central bank also said that it is closely monitoring the price situation and would take further action as warranted.
Reacting to RBI's measures, finance minister Pranab Mukherjee today said that the steps are on expected lines and the rate hike by Reserve Bank will gently tighten money supply and help moderate inflation.