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RBI raises policy rates by 50 basis points

May 3, 2011 - New Delhi

Reserve Bank of India (RBI) on Tuesday today raised repo and reverse repo rates by 50 basis points each for the current fiscal.

The RBI has also increased the saving bank rate by 50 basis points to four per cent to give higher returns to depositors in the wake of high inflation.

While the repo rate has been raised from 6.75 per cent to 7.25 per cent, the reverse repo rate has been raised to 6.25 per cent. However, the RBI has kept the Cash Reserve Ratio unchanged at six per cent. Savings bank deposit interest rate was increased from 3.5 per cent to four per cent.

Under a new arrangement, the repo rate becomes the central bank's only independently varying policy rate, and the reverse repo rate, at which the RBI absorbs excess liquidity, will be pegged 100 basis points below the repo rate.

The RBI said high prices of oil and other commodities and the cumulative impact of its policy measures will lead to moderating growth of about eight percent for the current fiscal year.

Announcing these measures, RBI Governor D Subbarao said: "RBIs baseline inflation projections are that inflation will remain elevated, close to the March, 11 level (8.98 percent) over the first half of FY12 before declining".


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