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RBI hikes CRR while other rates are steady
October 30, 2007: The Reserve Bank has hiked CRR of money banks by 0.5 per cent, which is the amount of money held by the bank has been increased despite inflation at a five-year low. However, the key lending and borrowing rates (repo and reverse repo) and bank rate are unchanged in the mid-term review of the monetary policy.
Cash Reserve Ratio is the amount of cash banks need to be kept with RBI and that does not pay any interest on such deposits. RBI Governor, Y V Reddy has been firm in his stand that the apex bank's hawkish stance would continue in order to ensure price stability, credit quality and orderly conditions in the financial market.
The central bank has left the economic growth projection for 2007-08 unchanged at 8.5 per cent and has continued to focus on keeping inflation low. Inflation has come down to 3.07 per cent, yet RBI expects it to be in the vicinity of 5 per cent by the end of 2007-08.
Source: Indian Express