RBI raises repo, reverse repo rates by 25 bps

The Reserve Bank of India (RBI) today, July 2 raised the short-term lending and borrowing rates by 25 basis points with immediate effect, a move which it aims will help contain inflation.

The move comes weeks ahead of the scheduled policy review by RBI on July 27 and a day after the government announced that food inflation dipped by about a quarter to about 12%.

The central bank raised both, repo and reverse repo rates (the rates at which the RBI lends and borrows short-term funds from commercial banks), by 25 basis points to 5.50 per cent and 4%, respectively.

The move would raise cost of funds for banks and temper demand for loans, and in turn, consumer spending.