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RBI Increases Short Term Lending Rates with an eye on Inflation

MP Rana, Wednesday 28th July 2010


During the quarterly review of the credit policy RBI announced a hike of 0.25 per cent points on the rate at which it lends short-term to banks and also a 0.50 per cent points on the reverse repo rate which the RBI accepts short-term funds from banks. This means that the repo rate and reverse repo rate will be 5.75 per cent and 4.50 per cent respectively.


This increased rate in the influential policies is a clear cut step at keeping a check on the inflation which is maintaining itself in the double digit bracket. So this hike in the policy rates according to the bankers will be dealt with increase in car and home loans.


But the hike will not see an immediate impact on the interest rates and banks as they will have to wait till October 1 to revise the rates as they have already fixed their benchmark base rate. But RBI is hopeful that despite the hike it will not impact the economy adversely as they are cashing on the good monsoon and flourishing domestic market. They have given a projection on GDP growth being 8.5 per cent from the earlier 8 per cent and hope

 
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