RBI hikes reverse repo rate by 0.25%

The Reserve Bank of India on Thursday increased the reverse repo rate (see below) by 25 basis points to 5.75 per cent from 5.50 per cent with immediate effect.

Simultaneously, the repo rate under the liquidity adjustment facility, which continues to be linked to the reverse repo rate, has also been increased by 25 basis points to 6.75 per cent from 6.50 per cent with immediate effect.

"On a review of current macro-economic and overall monetary conditions, the RBI has decided to increase the reverse repo rate under the liquidity adjustment facility to 5.75 per cent from the present 5.50 per cent," an RBI statement said.

Reverse repo means buying of securities on the agreement to resell them for a higher price at a specified date in the future. This is essentially just a loan of the security at a specific rate.