India’s central bank hikes cash reserve ratio by 25 basis points

July 29th, 2008 - 2:01 pm ICT by IANS  

Mumbai, July 29 (IANS) India’s central bank Tuesday hiked the minimum cash commercial banks have to retain against their deposits by 25 basis points even as it said the inflation rate will start falling from the fourth quarter of this fiscal. The hike in cash reserve ratio (CRR) was announced during the quarterly review of the monetary policy for the current fiscal conducted by Reserve Bank of India (RBI) Governor Y.V. Reddy.

The repo rate - or the interest charges for lending to commercial banks - was also hiked by 50 basis points. The CRR and repo rate now stand at 9 percent each, the RBI said in a statement.

“In view of the evolving environment of heightened uncertainty in global markets and the dangers of potential spillovers to domestic markets, liquidity management will continue to receive priority in the hierarchy of policy objectives over the period ahead.”

India’s annual rate of inflation based on wholesale prices currently stands at 11.89 percent.

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