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RBI increases Repo/Reverse Repo Rates

On a review of current macroeconomic and overall monetary conditions, the Reserve Bank of India has decided on 8th June 2006 to increase the reverse repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points to 5.75 per cent from 5.50 per cent with immediate effect.

Simultaneously, the repo rate under the LAF, which continues to be linked to the reverse repo rate with a spread of 100 basis points, is also being increased by 25 basis points to 6.75 per cent from 6.50 per cent with immediate effect.

NOTE: Interest rates are expected to rise across the board on all loans, including home loans. The reverse repo the rate at which RBI borrows from banks is now 5.75%, while the repo rate the rate at which RBI lends to banks has been raised to 6.75%.

RBI decision was in line with central bankers across the world who are pushing up interest rates to control inflation. On same day, 8th July, the European Central Bank and the Southern Central Bank also raised rates.

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