India's central bank hiked its short-term lending rate by 50 basis points and said the borrowing rate shall now on be pegged 100 basis points below it in a major policy decision Tuesday.
The Reserve Bank of India (RBI) also hiked the deposit rate by 50 basis points to 4 percent, from 3.5 percent - a move that should bring some cheer to millions of savings bank account holders, who park cash for short durations with commercial banks.
Repurchase rate, or the short-term lending rate, now stands at 7.25 percent against 6.75 percent earlier, while the reverse repurchase rate, or the short-term borrowing rate, now automatically stands revised to 6.25 percent, against 5.75 percent.
RBI Governor D. Subbarao, who unveiled the monetary policy for this fiscal, before the chief executives of commercial banks at the headquarter's at Mint Street in mid-town Mumbai, said these policy decisions take immediate effect.
Other policy rates such as the statutory liquidity ratio and the cash reserve ration -- the minimum quantum of money against deposits which the banks have to retain as cash or specified government securities -- have been left untouched.
The bank rate also remains unchanged at 6 percent.