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Home, car loan rates may rise more

Last updated on: July 25, 2006 16:00 IST

In a move that may put pressure on housing and other consumer loans, Reserve Bank of India on Tuesday hiked its short term lending and borrowing rates by 0.25 per cent.

In the quarterly review of the Annual Statement on Monetary Policy, the apex bank kept unchanged the long-term rates at which it lends to commercial banks at 6 per cent.

The short term rates - repo, reverse repo - were hiked by 0.25 per cent to 7 per cent and 6 per cent, respectively, even as the bank kept the Cash Reserve Ratio unchanged at 5 per cent.

The bank retained the projection of 7.5 to 8 per cent growth for the economy and kept inflation forecast intact at 5-5.5 per cent.

The rate hikes will take effect immediately, RBI said. The apex bank had affected a similar 0.25 per cent hike in repo and reverse repo rates about six weeks back on June 8.

The repo rate is the rate at which RBI lends to banks in the short term to manage liquidity in the system, while the reverse repo is the rate at which the apex bank borrows from banks to suck out excess liquidity from the system.

The rate hikes will take effect immediately, RBI said. The apex bank had effected a similar 0.25 per cent hike in repo and reverse repo rates about six weeks back on June 8.

The repo rate is the rate at which RBI lends to banks in the short term to manage liquidity in the system, while the reverse repo is the rate at which the apex bank borrows from banks to suck out excess liquidity from the system.

The Monetary and Credit Policy 2006-2007

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