<p>But Tuesday’s hike — the second policy action in a month — will lead to a gradual rise in interest rates as banks will see Rs 12,500 crore squeezed out from their system following the 25 basis points hike in CRR, lenders said.<br /><br />The repo rate — at which the RBI lends short-term money to banks — has been hiked to 5.25 per cent from 5 per cent. At the same time, the CRR requirement for banks has been raised by 25 basis points to 6 per cent.<br />Though the interest rate hike is with immediate effect, the CRR rise will be with effect from April 24. <br /><br />These measures, the RBI hopes, will help contain inflation without affecting the process of economic recovery. Wholesale prices-based inflation stood at 9.90 per cent in March this year, fuelled by high food prices.<br /><br />Briefing reporters here, RBI Governor D Subbarao said the apex bank wants to normalise policy rates in a calibrated manner but at the same time it is “keeping tight monetary vigil on liquidity situation.”<br /><br />Subbarao also said the RBI won’t rule out further monetary tightening before the next review at the end of July. “But we will think many times before taking mid-cycle action,” he said. <br /><br />Dalal Street gave the thumbs- up to the RBI’s policy to increase rates moderately with a 60-point increase in the sensex. Most bankers are of the view that since there is sufficient liquidity in the system, interest rates will not see any hike immediately. <br /><br />The RBI also said that its policy actions would not halt the recovery and pegged the GDP growth for 2010-11 at 8 per cent. It also pegged the wholesale inflation, which is currently hovering close to the double-digits, at 5.5 per cent for fiscal year 2011. <br />It, however, thinks the Rs 4.57 lakh crore government borrowing plan is likely to pose a bigger challenge to the central bank to manage in the current fiscal. <br /><br /></p>
<p>But Tuesday’s hike — the second policy action in a month — will lead to a gradual rise in interest rates as banks will see Rs 12,500 crore squeezed out from their system following the 25 basis points hike in CRR, lenders said.<br /><br />The repo rate — at which the RBI lends short-term money to banks — has been hiked to 5.25 per cent from 5 per cent. At the same time, the CRR requirement for banks has been raised by 25 basis points to 6 per cent.<br />Though the interest rate hike is with immediate effect, the CRR rise will be with effect from April 24. <br /><br />These measures, the RBI hopes, will help contain inflation without affecting the process of economic recovery. Wholesale prices-based inflation stood at 9.90 per cent in March this year, fuelled by high food prices.<br /><br />Briefing reporters here, RBI Governor D Subbarao said the apex bank wants to normalise policy rates in a calibrated manner but at the same time it is “keeping tight monetary vigil on liquidity situation.”<br /><br />Subbarao also said the RBI won’t rule out further monetary tightening before the next review at the end of July. “But we will think many times before taking mid-cycle action,” he said. <br /><br />Dalal Street gave the thumbs- up to the RBI’s policy to increase rates moderately with a 60-point increase in the sensex. Most bankers are of the view that since there is sufficient liquidity in the system, interest rates will not see any hike immediately. <br /><br />The RBI also said that its policy actions would not halt the recovery and pegged the GDP growth for 2010-11 at 8 per cent. It also pegged the wholesale inflation, which is currently hovering close to the double-digits, at 5.5 per cent for fiscal year 2011. <br />It, however, thinks the Rs 4.57 lakh crore government borrowing plan is likely to pose a bigger challenge to the central bank to manage in the current fiscal. <br /><br /></p>
