The Reserve Bank of India announced its decision of increasing short term lending and borrowing rated by 0.25 per cent and 0.50 per cent on Tuesday, July 27, 2010 to curb the inflation.
The Cash Reserve Ratio (CRR) is going to be unaffected. The RBI is focusing to bring inflation at six percent before the fiscal year ending, that is, March 2011.
The RBI informed,
“Inflationary pressures have exacerbated and become generalised with demand side pressures clearly visible…given the spread and persistence of inflation, demand-side inflationary pressures need to be contained,” the RBI said.
The RBI also states that this financial year the economy will grow by 8.5 per cent after it raised the inflation target from 5.5 per cent to six per cent.
The changes in the short term lending rate to 5.75 per cent and short term borrowing rate to 4.5 per cent will be brought in effect immediately.