Coal news and updates

RBI raises repo rates by 25 bps, CRR unchanged

January 28: Reserve Bank Governor Raghuram Rajan again surprised the markets and raised the key policy rate by 0.25% to 8% in a bid to curb inflation, a move that may translate into higher EMIs and push up the cost of borrowing for corporates.

"… an increase in the policy (repo) rate by 25 basis points is needed to set the economy securely on the recommended disinflationary path," Dr Rajan said while unveiling the Third Quarter Review of the Monetary Policy.

Consequently, the reverse repo rate under the liquidity adjustment facility will be revised to 7% and the marginal standing facility rate and Bank Rate to 9%.

However, the RBI kept the cash reserve ratio unchanged at 4% as liquidity seemed to be comfortable.

It was widely expected that Dr Rajan would maintain the status quo on rates to support growth.

Ahead of the quarterly review, Rajan had termed inflation a "destructive disease".

The RBI governor said economic growth would be below 5% in the current financial year and could accelerate in 2014-15 to a mean projection of 5.5%.

In line with the Urjit Patel committee recommendations, monetary policy reviews will henceforth be undertaken every two months, consistent with the availability of key macro-economic and financial data, Rajan said.

The RBI's baseline projections for retail inflation indicate that over the ensuing 12-month horizon, and with the current policy stance, there are upside risks to the central forecast of 8%.

The repo rate hike is likely to have a bearing on interest rates and may push up the cost of funds for retail as well as corporate borrowers.