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CRR and Repo Rate raised

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July 30th, 2008 · No Comments

Reserve Bank of India (RBI) tightened the liquidity in the system by raising the Cash Reserve Ratio (CRR) of banks by 25 basis points to 9 per cent and the short-term indicative rate (repo rate) by 50 basis points to 9 per cent.

Possible outcomes are:
Increase in CRR expected to shore up another Rs. 9,000 crore and GDP growth projection for 2008-09 revised to around 8 per cent.
These hikes will increase lending rates of banks, which in result loans for housing, cars and personal purpose will be dearer.

RBI Governor Y.V. Reddy said,

“Exaggerated bearishness is as dangerous as exaggerated bullishness. We are emphasising a lot on inflation but underplaying growth.” 

“current intolerable level of inflation to a tolerable level of below 5 per cent as soon as possible and around 3 per cent over the medium term,”

 “We are not expecting any pass-through of global oil prices to domestic prices in the current financial year.”

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