The Reserve Bank today raised by 75 basis points the cash reserve ratio -- the amount lenders need to keep with the central bank-- to suck Rs 36,000 crore out of the system and cool down the surging inflation.
The RBI's move to absorb a large amount of liquidity is expected to have a bearing on interest rates, although bankers ruled out an immediate hike in lending rates as there is excess liquidity in the system.
The apex bank in its third quarter monetary policy review, however, refrained from raising short-term borrowing and lending rates (repo and reverse repo), primarily to encourage growth which is "is yet to fully take hold".
Encouraged by 7.9 per cent growth in the second quarter (July-September 2009), the RBI raised the economic growth forecast for the current fiscal to 7.5 per cent, up from 6 per cent projected in October.
Promising to take more action to tackle the price rise, the RBI said inflation is likely to firm up to 8.5 per cent by March-end from 7.3 per cent in December. The Reserve Bank had earlier projected the inflation to be around 6.5 per cent by fiscal-end.
"Reduction in excess liquidity will help anchor inflationary expectations. The recovery process will be supported without compromising price stability," RBI Governor D Subbarao said in his policy statement.
