In a move that may put pressure on housing and other consumer loans, Reserve Bank of India today hiked its short term lending and borrowing rates by 0.25 per cent.
In the quartely review of the Annual Statement on Monetary Policy, the apex bank kept unchanged the long-term rates at which it lends to commercial banks at 6 per cent.
The short term rates -- repo, reverse repo -- were hiked by 0.25 per cent to 7 per cent and 6 per cent, respectively, even as the bank kept the Cash Reserve Ratio unchanged at 5 per cent.
The bank retained the projection of 7.5 to 8 per cent growth for the economy and kept inflation forecast intact at 5-5.5 per cent.
The rate hikes will take effect immediately, RBI said.
The apex bank had effected a similar 0.25 per cent hike in repo and reverse repo rates about six weeks back on June 8.
The repo rate is the rate at which RBI lends to banks in the short term to manage liquidity in the system, while the reverse repo is the rate at which the apex bank borrows from banks to suck out excess liquidity from the system.
Priority to contain inflation
The apex bank further said it would accord highest priority to contain inflation within 5-5.5 per cent, while keeping its projection for economic growth during 2006-07 unchanged at 7.5 to 8 per cent.
It would also endeavour to ensure that appropriate liquidity is maintained to meet the legitimate credit requirements consistent with price and financial stability, the bank said in the quarterly review of the Annual Statement on Monetary Policy.
