RBI hikes CRR by 0.5 pc to control inflation

Mumbai: The Reserve Bank of India on Thursday hiked Cash Reserve Ratio, the amount of depositors' money that banks need to park with it, by half a per cent to tighten money supply, as part of concerted efforts with the government to ease inflation.

The hike, which would take CRR to 8 per cent, would come into effect in two tranches of 0.25 percent on April 26 and May 10, the RBI said in a statement here.

The unscheduled hike comes ahead of RBI's annual credit policy for 2008-09 to be unveiled on April 29.

The measure would suck out liquidity to the tune of Rs 18,500 crore from the banking system and would leave banks with less money to lend and in turn would help cool inflation that is at a three-year high of 7.14 percent.

"In the light of the current macro-economic, monetary and anticipated liquidity conditions, and with a view to containing inflation expectations, it is essential to take appropriate action on an urgent basis," RBI said in a statement.

For international news click here >> | For political news click here >> | For offbeat news click here >>