Repo & Reverse Repo Rates Hiked by RBI

Reserve Bank of India (RBI) on 27 July 2010 raised its short-term policy rates to control inflation. The apex bank hiked the repurchase rate by 25 basis points to 5.75 percent and the reverse repurchase rate by 50 basis points to 4.50 percent. The decision was taken during the first-quarter review of the apex bank's monetary policy by the RBI governor for the current fiscal. The first of the four rate hikes happened on 29 Jan 2010. The January hike was followed by hikes on 19 March and 2 July in order to control the inflation that touched double digits, 10.55 percent in June 2010. Following RBI's measure several banks increased their deposit rates. HDFC on 28 July 2010 raised its deposit rates by 25 to 75 basis points for different maturities. Lakshmi Vilas Bank, a south-based small private sector bank increased rates on deposits by 25 to 50 basis points with effect from 2 August 2010. The stock markets however racted reacted in a positive manner to the monetary policy adopted by the reserve bank, with the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) rising 77.17 points at 18,097.22 points.