The only silver lining is a possible hike in deposit rates as well, with banks now trying to raise more money to offset the squeezing effect of the CRR hike.

Some economists, however, are critical of these moves to tighten money supply. They argue that the current high inflation is mainly because of rise in prices of primary articles like foodgrains and commodities, which can be controlled only through supply side management. The increase in the interest rates, they say, will hurt economic growth. Call money rates on overdrive

The real estate sector, one of the main drivers of the current economic boom, is already badly hit because of recent hikes in interest rate. A senior official of a private sector bank with a large home loan portfolio, said that home loan disbursement in March 2007 has been less than half of what it was in the same month last year.

Finance minister P Chidambaram expressed his full support to the RBI move. He said the central bank had announced the measures after consulting the government.

However, despite RBI's recent tightfisted money supply policy, inflation has remained around 6.5%.

On Friday, RBI made a significant policy shift by saying that its main concern was to rein in inflation. This was a departure from its earlier stated policy of encouraging high growth in a mildly inflationary environment. An RBI statement said,``The stance of monetary policy has progressively shifted from an equal emphasis on price stability along with growth to one of reinforcing price stability with immediate monetary measures and to take recourse to all possible measures in response to evolving circumstances.''

To tighten money supply, RBI has already slowed down the purchase of dollars, which has resulted in an appreciation of the rupee. As a result, the inter-bank overnight lending rate has gone up to 80% on Friday.