RBI steps in to control inflation
Inflation has soared to 8.75 per cent for the week ended May 31. It is set to cross the 9 per cent mark when the official data is released on June 20, which reflect the impact of hike in fuel prices, according to analysts.
As part of inflation control measures, the Reserve Bank of India had last week increased the repo rate to 8 per cent, prompting the banks to consider a rise in lending rates for consumers and industries.
The continuous rise in inflation has forced the banks to increase interest rates which analyst feel could further add to the cost factor. However, the monetary measures are aimed at cooling the high demand which is pushing up prices.
Most of the banks have the prime lending rates pegged at around 13 %. Besides raising the short-term lending rate (repo rate), RBI had also sucked over Rs 27,000 crore out of the economy by increasing the Cash Reserve Ratio by 0.75 per cent in three phases.