The Reserve Bank of India (RBI) on Friday raised the cash reserve ratio (CRR) for banks by a higher than predicted 75 basis points but, as usual, left key interest rates unaffected.
Whereas quantitative tools would consist of imposing cash reserve requirements for banks, fixing the repo rate or reverse repo rates, the bank rate, and set down the level of statutory liquidity ratio (SLR) to signal the level of growth in the financial marketplace, pursuant with its development purpose for the economy.
CRR raised by 75 basis points in two phases to 5.75%; in first phase of 50 bps effective from 13 February, 2010 and second phase effective 27 February, 2010 respectively.
Repo rate assumed steady at 4.75 %, and reverse repo rate steady at 3.25%; forecasts had centred on increase of up to 50 bps in CRR, and steady rates.
After cooling off for three successive weeks, food inflation is back on an increasing track. It rose to 17-percent on 16th Jan from 16.81-percent a week earlier, and on the back of return prices of eggs and vegetables.
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