Reserve Bank of India raises two key interest rates

Home loans set to get costlier after central bank raises repo rate, at which it lends to banks, to 6.25 per cent and the reverse repo rate, at which it absorbs excess cash, to 5.25 per cent.

Reserve Bank of India raised interest rates for the sixth time this year on Tuesday to tame inflation, and indicated that the increase was likely to be its last in the near term.

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The Reserve Bank of India raised its lending and borrowing rates by 25 basis points each, as expected by most analysts.

The RBI lifted the repo rate, at which it lends to banks, to 6.25 per cent and raised the reverse repo rate, at which it absorbs excess cash, to 5.25 per cent.

"Based purely on current growth and inflation trends, the Reserve Bank believes that the likelihood of further rate actions in the immediate future is relatively low," Reserve Bank of India Governor Duvvuri Subbarao said in his second quarter monetary policy review.

As expected, the RBI left the cash reserve ratio unchanged at 6 per cent.

The central bank said in a report on Monday that inflation remained "above the comfort level", similar to comments from Finance Minister Pranab Mukherjee, who said inflation was a matter of concern.

Asia's third-largest economy is on track to grow at 8.5 per cent in the fiscal year that ends in March.