The
Finance Ministry today, 25 June 2008, said the hike in repo rate and
cash reserve ratio (CRR) by the Reserve Bank of India announced on
Tuesday, 24 June 2008, are aimed at moderating aggregate demand, and
its policy stance should boost the confidence of foreign and domestic
investors.
RBI, late on Tuesday raised repo rate by 50 basis
points to 8.5% with immediate effect. The repo rate is now at its
highest since March 2002 after the second hike this month. The
objective of the Reserve Bank of India (RBI) is to moderate and manage
aggregate demand, the statement said. The intention is to achieve the
objective while ensuring the prospects of overall economic growth
remain positive, it said.
RBI also raised the cash reserve
ratio, the proportion of deposits banks must keep with the central
bank, to 8.75% from 8.25% to be effective in two tranches of
25-basis-point each from 5 July 2008 and 19 July 2008.
The
policy stance adopted by the RBI should boost the confidence of
investors both domestic and foreign and augur well for the economy, the
statement said.
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