RBI raises repo, reverse repo rates by 25 bps each

Since last March, this is the eighth time the RBI increased the rates and this move of the central bank would increase the borrowing cost of customers.

The central bank has increased the repo rate by 25 basis points from 6.5 per cent to 6.75 per cent and the reverse repo rate by 25 basis points from 5.5 per cent to 5.75 per cent with immediate effect.

Repo rate is the rate at which banks borrow money from the central bank and reverse repo is the rate at which banks park their funds with the central bank.

In its mid-quarter monetary policy review, the RBI said that further upside risks have stemmed from high international crude prices, their impact on freely priced petroleum products, increase in administered coal prices and pick-up in non-food manufactured product prices. "The March 2011 WPI inflation is now estimated to be higher, around 8 per cent." In its third quarter review, the Reserve Bank had projected year-on-year WPI inflation for March 2011 at 7 per cent.