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The Reserve Bank of India (RBI) raised its key lending rate yet again by another quarter percentage point as it continues its fight against stubborn inflation while equally being concerned about slowdown in the Indian economy.

The central bank hiked the repurchase rate, or repo rate (at which it lends to banks) by 25 basis points (bps) to 8.50%. The reverse repo rate (at which the RBI absorbs money from banks) will now stand at 7.50%. The Cash Reserve Ratio (CRR) of scheduled banks has been left unchanged at 6% of their net demand and time liabilities.

Banks are expected to announce further hike in housing loan and car loan rates after this announcement.

RBI also deregulated the savings bank interest rate in the monetary review.

We hope this would be the last series of hike in lending rate. After this the RBI should either hold on to these rates or reduce it by 25 basis points. The key decision maker would be the inflation which is expected to cool down after this announcement and reduction in global commodity prices.

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