There was no surprise in the first phase of full policy unveiled by new RBI Governor Raghuram Rajan, who increased the repo rate, as was widely expected, by 0.25 percent to 7.75 percent and brought down the cost of short-term funds for banks by slashing the marginal standing facility (MSF) rate by a similar quantum to 8.75 percent.

However, Raghuram Rajan doubled the borrowing limit of banks against their cash positions or NDTL to 0.5 percent for both 7-day and 14-day repos, with immediate to increase liquidity in the system.

The RBI left other rates like Cash Reserve Ratio (CRR) unchanged at 4 percent and mandatory holdings in government securities and other liquid assets as a solvency measure (SLR) unchanged at 23 percent.

The central bank also reduced the growth forecast for the current fiscal to 5 percent from 5.5 percent, which was projected earlier. Economic growth fell to a decade-low of 5 percent in the previous financial year.

Rajan said that the new measures have been brought in to curb mounting inflationary pressures in order to manage inflation.

"These will help strengthen the environment for growth by fostering macroeconomic and financial stability. The Reserve Bank will closely monitor inflation risk, while being mindful of the evolving growth dynamics," he said.    


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