Repo Rate, RBI 2008, what is repo rate, hikes rep rate
The Reserve Bank of India on Wednesday announced a hike in repo rates by 25 bps to 8 per cent from 7.75 per cent. The reverse repo rate has been kept unchanged.
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In a bid to tame rising prices which have pushed the annual inflation rate beyond 8 per cent, India's central bank of Wednesday raised the repo rate by 25 basis points to 8 per cent from existing 7.75 per cent.

However, the apex bank - the Reserve Bank of India (RBI) - has kept the reverse repo rate unchanged.

Repo rate is the rate at which banks borrow money from the RBI, while reverse repo rate is the rate at which RBI borrows from the commercial banks.

The apex bank's move comes on the back of Prime minister Manmohan Singh's statement that both administrative and fiscal measures will be taken to contain inflation.

In fact, the inflation rate has shot up by at least 80 basis point following the steep hike in the prices of petroleum products announced on June 4.

The apex bank in a statement said it had addressed the "unprecedented uncertainties and dilemmas that exist".

It said: "Monetary policy has to respond proactively to immediate concerns. At the same time, it is critical at this juncture to demonstrate on a continuing basis a determination to act decisively, effectively and swiftly to curb any signs of adverse developments in regard to inflation expectations."

What is Repo Rate??

Definition :
Discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), to contract the money supply it increases the repo rates.

Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate.