Tuesday, February 14, 2012

RBI Makes Technical Adjustment to Bank Rate 350bps to 9.50%

The Reserve Bank of India [RBI] raised its old bank rate 350 basis points to 9.50% as a one-time technical adjustment to align it with the main policy rates (repo rate, and reverse repo rate).  The interest rate (specifically discounting and rediscounting) has largely remained disused since 2003, however it has some application in liquidity management, and consistency between rates is considered desirable.  The RBI last held its main repo rate at 8.50%, and reverse repo rate at 7.50% and cut its cash reserve ratio by 50bps to 5.50% at its January meeting.


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