The Reserve Bank of India has hiked its cash reserve ratio by 75 bps to 5.75% as against 5% at its credit policy meet today. (100 basis points=1%)
The move will be implemented in two stages. The first 50 bps hike will come into effect on February 13 while the next 25 bps hike will be effective February 27. The move will result in a mop-up of Rs 36,000 crore by February end.
The central bank has left unchanged the reverse repo, repo, and bank rate at 3.25%, 4.75%, and 6% respectively.
D Subbarao, Governor, RBI, says the confidence in recovery justifies reversing the expansionary policy. "The policy at current levels was more consistent with the crisis situation."
He acknowledged that the recovery yet to fully take hold. "Though the recovery is reassuring, it is still unbalanced and yet to be sufficiently broadbased. Our interest rate stance will balance price stability and support growth" Industrial production in November 2009 grew at 11.7%, the fastest in the last two years.
Source & Full Article Money Control
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