The Reserve Bank of India (RBI) has increased the bank rate by 3.5 percentage points to 9.5 per cent with immediate effect. The hike in the official policy rate of the central bank comes after a gap of nearly nine years.
This, RBI said, is a one-time measure to align the bank rate with its repo rate on the Marginal Standing Facility (MSF), which is used to provide cash to banks under the Liquidity Adjustment Facility (LAF).
''The bank rate shall be 9.5 per cent with effect from the close of business today,'' RBI said in a release.
''This should be viewed and understood as one-time technical adjustment to align the Bank Rate with the MSF rate rather than a change in the monetary policy stance,'' RBI said.
The bank rate will henceforth be aligned to the MSF rate whenever there is any revision in the MSF rate, RBI added.
Along with this, RBI also raised the penal interest banks have to pay on any shortfall in their reserve requirements, which are specifically linked to the bank rate.