Reserve Bank of India (RBI) raised key interest rates by 25 basis points to check rising prices in its mid-quarterly policy review on Thursday. The RBI hiked its repo rate or the rate at which it infuses money into the banking system to 7.5 percent and reverse repo rate, at which it sucks out excess money, to 6.5 percent. Talking to Zee News, an official at the Oriental Bank of Commerce said, "It was quite inevitable to hike the key interest rates keeping in view the stubborn inflation." About impact on ordinary citizens, he added, "Since the cost of deposit is high, it is also possible that the banks would pass on the burden to customers thus makings loans dearer." Inflation, according to the latest data, rose to 9.06 percent in May, much above the Central Bank`s comfort level of 5-6 percent. According to the RBI report, "inflation is likely to continue facing upward pressure". Inflation has continued to remain high despite the Reserve Bank raising the key lending (repo) and borrowing (reverse repo) rates nine times since March 2010.
Central Chronicle
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