RBI hikes short term rates to cope up with inflation

To bring inflation to six percent by the month March 2011, The Reserve Bank of India has raised its borrowing and short-term lending rates by 0.50 percent and 0.25 per cent respectively.Though, this step is not going to pressurize the interest rates of banks.


However, RBI keeps its cash reserve ratio (CRR) in monetary review, it is the cash which banks need to keep with RBI. It remains unchanged. The Reserve Bank of India is looking forward for a growth in country's economy. As per it's projections, the economy will grow by 8.5 per cent, to tame inflation it has raised the inflation target from 5.5 per cent to six per cent this fiscal.

The increased short-term lending rate (repo) and short-term borrowing rate (reverse repo) would be 5.75 per cent and 4.5 per cent respectively. Since January, The Reserve Bank of India has hiked its key rates thrice to meet the pressure of Inflation.