RBI raises reverse repo, repo rates
Mumbai: The Reserve Bank of India has hiked its key short-term interest rates by 0.25 percentage points with immediate effect. The RBI's measure is being read as a pre-emptive move to rein in the inflationary impact of higher oil prices.

The RBI has hiked the reverse repo rate to 5.75 per cent from 5.50 per cent and the repo rate to 6.75 per cent from 6.50 per cent. The RBI's move could lead to a further hike in interest rates, though some banks had very recently raised both deposit and lending rates.

The reverse repo rate is the rate at which the RBI borrows or absorbs excess funds from banks.

Last fiscal, the RBI raised reverse repo rates three consecutive times, most recently in the January 2006 quarterly review of the credit policy.

The annual wholesale price index-based inflation rose 4.74 per cent during the week ended May 20, higher than the previous week's annual rise of 4.32 per cent.

Market participants had expected a rate hike before the policy review due in July 2006, taking a cue from the language adopted by the central bank.
Back to News Review index page  

NABARD to raise Rs11,000-cr frm mkt
Mumbai: The National Bank for Agriculture and Rural Development (NABARD) plans to raise about Rs1,000 crore from the market in the current fiscal (FY07) to support its refinance for commercial banks and co-operative banks.

The total resource requirement of the bank for FY07 is estimated at Rs14,000-15,000 crore. Out of this, Rs3,000 crore would be raised from general line of credit from Reserve Bank of India (at bank rate ), NABARD chairman Y S P Thorat said.

For its market borroiwngs, the refinance institution would approach banks, basically short term resources (1-3 years) and insurance companies and tap insurance companies and pension funds for long term funds (upto 10 years), he said. The refinance for the cooperative sector would be about Rs14,000 crore while it would lend Regional Rural Banks (RRBs) Rs2,000-3,000 crore.

NABARD would lend to co-operatives at 2.5 per cent and RRBs at 4.5 per cent while the actual cost of funds for refinance institution is about 7.5-8 per cent. The gap between the cost of funds and rate at which funds are lend to co-operatives and RRBs would be met by the government of India through interest subvention (subsidy).
Back to News Review index page