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RBI hikes repo rate by 25 bps to 8%
by Jo BlackIndia’s central bank, the Reserve Bank of India (RBI) on 11 June raised the repo rate by 25 basis points to 8 per cent from the existing 7.75 per cent, but kept the reverse repo rate unchanged at 6%. The bank rate too remains steady at 6%.
This is the first increase in the repo rate since March 2007. However, the repo rate is now at its highest since November 2002.
The key lending or repo rate is the rate at which domestic banks borrow money from the RBI, while reverse repo rate is the rate at which RBI borrows from the commercial banks.
The hike in repo rate, which was announced after market hours, was outside its scheduled policy review.
The RBI’s next scheduled policy review is slated for 29 July.
The RBI move is an attempt to control rising prices which have already pushed the annual inflation rate beyond 8 per cent.
The apex bank in a statement said it had addressed the unprecedented uncertainties and dilemmas that exist.
The Reserve Bank of India is the central bank of the country entrusted with monetary stability, the management of currency and the supervision of the financial as well as the payments system.
RBI formulates implements and monitors the Monetary Policy, announced twice a year.
The main objectives of the central bank includes, maintaining price stability and ensuring adequate flow of credit to productive sectors, and to maintain optimum liquidity in the economy of the country.
Established in 1935, RBI’s functions and focus have evolved in response to the changing economic environment.
Its history is not only intrinsically interwoven with the economic and financial history of the country, but also gives insights into the thought processes that have helped shape the country’s economic policies.
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