RBI ups repo rate by 25 bps, cuts MSF rate by 75 bps - Moneycontrol.com

he Reserve Bank of India , in its mid-quarter policy review, raised repo rate by 25 bps to 7.5 percent. The policy, however, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 percent and lowered the minimum daily maintenance of the cash reserve ratio (CRR) from 99 percent to 95 percent of the requirement, effective from the fortnight beginning September 21, 2013. The reverse repo rate under the LAF stands adjusted to 6.5 per cent and the Bank Rate stands reduced to 9.5 per cent. Contrary to market expectations, the new governor Raghuram Rajan's maiden policy came in as hawkish, primarily because it maintained the apex banks views on controlling inflation. Reacting to the announcement, the rupee fell 1 percent, bond yield rose to 8.3 percent, and share prices of banking stocks witnessed a sharp decline.  Most of the economists polled by CNBC-TV18 were expecting the RBI to bring down the daily requirement to 90 percent of CRR, while a few expected it to come down below 90 percent. Jahangir Aziz of JPMorgan had opined that MSF should be brought back to its old level and instead repo rate should be hiked by about 50 bps. In a bid to control liquidity, the RBI had last month restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from MSF.

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