Press Information Bureau
Government of India
Ministry of Finance

19-August-2011 17:43 IST

Repo and Reverse Repo Rates Increased by Reserve Bank of India from Time To Time To Contain Inflation

 

The Reserve Bank of India (RBI) has increased the repo and reverse repo rates from time to time to contain inflation and anchor inflationary expectations. The following table captures the movement in repo and reverse repo rate since April 2010:

            As a result of the hike in policy rates, banks have increased their base rate and Benchmark Prime Lending Rates (which are signal lending rates of banks).   As far as agricultural and industrial growths are concerned, they depend on a number of factors besides the cost of credit such as monsoon and the determinants of the level of aggregate as well as product specific demand and supply. Year-on-year, Industrial growth was at 8.8 per cent in June 2011 as per the Index of Industrial Production. The near normal southwest monsoon in 2011 augurs well for the overall agricultural growth this year.

On an ongoing basis Government has been providing interest subvention to certain sectors of the economy and sections of the society on merits.          

           

This information was given by the Minister of State for Finance, Shri   Namo Narain Meena in written reply to an Unstarred Question in Lok  Sabha today.

 

DSM/SS/PM

Policy rate increases tighten credit conditions, prompting banks to raise lending rates while interest subvention remains targeted. The central bank increased the repo and reverse repo rates through successive hikes from April 2010 into mid 2011 to anchor inflationary expectations; banks responded by raising base rates and Benchmark Prime Lending Rates, tightening credit. The release also notes that agricultural and industrial growth depend on non credit factors such as monsoon and demand supply, cites reported industrial growth for June 2011, and records continued government interest subvention to certain sectors on merit.