RBI hikes repo rate by 0.25 percent

Mumbai, Sep 20 (IANS) In a surprise move, the Reserve Bank of India (RBI) Friday hiked its key policy rate by 0.25 percent, a move that will make housing, auto and other loans costlier.

In its mid-quarter review of the monetary policy for fiscal 2013-14, the central bank increased repurchase or repo rate by 0.25 percent to 7.5 percent.

The reverse repo rate is adjusted at 6.5 percent from the earlier 6.25 percent.

Cash Reserve Ratio (CRR), the proportion of money that commercial banks must keep with the central bank, has been kept unchanged at 4 percent.

The central bank reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 percent to 9.5 percent with immediate effect.

The minimum daily maintenance of CRR is also reduced from 99 percent of the requirement to 95 percent effective from the fortnight beginning Sep 21, the RBI said.

"The policy stance and measures set out in this review begins the process of cautious unwinding of the exceptional measures, which will restore normalcy to financial flows," the bank said in a statement.

"They are also intended to address inflationary pressures so as to provide a stable nominal anchor for the economy, thereby mitigating exchange market pressures and creating a conducive environment for the revitalisation of sustainable growth," it said.

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