The Reserve Bank of India today raised the Repo rate to 5.25% and Reverse Repo rate to 3.75%, and increased the Cash Reserve Ratio to 6%. These are all 25 basis point increases.
End customer lending rates may not go up right away, say banks.
The rate increase was because the earlier rates were “more consistent with a crisis situation than a fast recovering economy”, said the RBI. Plus, inflation is too high – and it’s moved from supply issues to probably higher demand. And lastly, liquidity is required if only to let people buy government securities, which are going to see 36% more issuance than last year.
