Main Points:
- hike in repo & reverse repo rate by 50 bps to 7.25% and 6.25% respectively.
- Cash reserve ratio remain unchanged at 6%.
- Increase in Savings bank deposit interest rate from the present 3.5% to 4% with immediate effect.
- Set a target of 6% inflation with an upward bias.
- Target growth rate at 8%.
- Starting new Marginal Standing Facility(MSF)-banks can borrow overnight from the MSF upto 1% of their respective net demand and time liabilities(NDTL) at 100 basis points above the repo rate with effective from 7May11.
Impact
- Increase in both deposit & lending rates
- Dearer Loans & higher EMIs
- Negatively affect sensitive sectors like auto & infrastructure
- Good news for Depositors-higher interest rate
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