RBI raises policy rates by 50 basis points

Mumbai: In a bid to check inflation, Reserve Bank today raised its short term lending (repo) rate by 50 basis points to 7.25 per cent, while lowering the economic growth projection to 8 per cent for the current fiscal.

The RBI has also increased the saving bank rate by 50 basis points to 4 per cent to give higher returns to depositors in the wake of high inflation.

RBI Governor D Subbarao announced these measures as part of annual credit policy to contain inflation, which is hovering around 9 per cent, and sustain economic growth in the medium-term.

RBI has pegged GDP growth rate for the current fiscal at 8 per cent against the government`s projection of 9 per cent. The economy grew by 8.6 per cent in 2010-11.

The reverse repo, the rate at which bank park funds with RBI, has been raised by 50 basis points to 6.25 per cent.