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RBI hikes interest rate by 40 bps to 4.40%

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The Reserve Bank on Wednesday announced a hike in cash reserve ratio (CRR) by 50 basis points to 4.5 per cent, effective May 21, which will take out Rs 87,000 crore liquidity from the system.

NEW DELHI: The Reserve Bank of India (RBI)  on Wednesday increased the benchmark lending rate by 40 basis points (bps) to 4.40 per cent in a bid to contain inflation, which has remained stubbornly above the target zone of 6 per cent for the last three months.

The decision follows an unscheduled meeting of the Monetary Policy Committee (MPC), with all six members unanimously voting for a rate hike while maintaining the accommodative stance.

While the inflation has remained above the targetted 6 per cent since January, RBI Governor Shaktikanta Das said the inflation print in April is also likely to be high.

The retail inflation print for March stood at 6.9 per cent.

The RBI has done the first rate hike since August 2018.

The governor said the decision of MPC reversed the May 2020 interest rate cut by an equal amount.

The central bank had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting the interest rate to a historic low of 4 per cent.

RBI raises CRR by 50 bps to 4.5 pc from May 21

The Reserve Bank on Wednesday announced a hike in cash reserve ratio (CRR) by 50 basis points to 4.5 per cent, effective May 21, which will take out Rs 87,000 crore liquidity from the system.

The decision was announced by RBI Governor Shaktikanta Das after an off-cycle meeting of the rate-setting panel -- Monetary Policy Committee (MPC).

CRR is a percentage of a bank's total deposits that it needs to maintain as liquid cash.

The MPC also decided to raise the repo rate or the short-term lending rate by 40 basis points to 4.4 per cent.

Source: Press Trust of India

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