RBI raises repo, CRR by 50 basis points each to tame prices

Under relentless pressure to control inflation, RBI on Tuesday hiked both short-term lending rate and mandatory cash reserve for banks by 50 basis points each, a move that could force banks to raise interest rates on loans to corporate and consumers.
It has been decided that the short-term lending rate (repo) is increased from 8 per cent to 8.50 per cent with immediate effect, RBI said in a notification in Mumbai.
Besides, the Cash Reserve Ratio, the amount that banks need to maintain with RBI, will be increased by 50 basis points to 8.75 per cent in two stages, effective from a fortnight beginning from July 5 and July 19.
The RBI's decision came within days of the Finance Ministry saying that monetary steps are the first line of defence in fight against inflation which touched 13-year high of 11.05 per cent for the week ended June 7.
The RBI had earlier increased the repo rate by 0.25 per cent to 8 per cent on June 11.