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RBI?s move could push up loan rates

The Reserve Bank of India raises the cash reserve ratio (CRR) to 6 per cent ? an increase of 0.5%, report Deepak Joshi and Arun Kumar

india Updated: Feb 14, 2007 03:17 IST

Ina fresh effort to curb money supply and control inflation — which touched a two-year high last week — the Reserve Bank of India (RBI) on Tuesday raised the cash reserve ratio (CRR) to 6 per cent — an increase of 0.5 per cent.

The CRR is the percentage of a bank’s total deposits which it must keep with the RBI. The hike is expected to draw around

Rs 14,000 crore out of circulation. It will be carried out in two phases starting February 17 and March 3.

Bankers expect interest rates to rise as a result, particularly in the retail sector, on consumer and home loans. The CRR increase, the second in three months, is the latest in a series of measures the RBI has been taking to bring down inflation.

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First Published: Feb 14, 2007 03:17 IST