Reserve Bank of India (RBI) raises repo rate by 25 bps, Cuts MSF by 25 bps, holds cash reserve ratio.
Reserve Bank of India Governor hiked the repo rate by 25 basis points in the October monetary policy review today.
The repo rate is now at 7.75 per cent. He had also raised it by 25 bps in the mid-quarter review in September.
Inflation has been on the upswing during the past few months. Wholesale price index (WPI) inflation touched 6.46 per cent in September while consumer price index inflation was at 9.84 per cent. Both these measures have been way beyond the comfort level of the RBI.
The Governor has also cut the marginal standing facility (MSF) rate by 25 bps to 8.75 per cent. The corridor between the repo rate and the MSF rate is now back to 100 bps signalling the return to normalcy in currency markets.
The Marginal Standing Facility (MSF) is an emergency window that banks borrow from when faced with a funds crunch.
The RBI has kept cash reserve ratio (CRR) unchanged at 4.0 per cent of deposits and increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 per cent of deposits of the banking system to 0.5 per cent with immediate effect.