In a bid to check inflation, Reserve Bank today raised its short term lending (repo) rate by 50 basis points to 7.25 per cent, while lowering the economic growth projection to 8 per cent for the current fiscal. The RBI has also increased the saving bank rate by 50 basis points to 4 per cent to give higher returns to depositors in the wake of high inflation.
RBI Governor D Subbarao announced these measures as part of annual credit policy to contain inflation, which is hovering around 9 per cent, and sustain economic growth in the medium-term.
RBI has pegged GDP growth rate for the current fiscal at 8 per cent against the government’s projection of 9 per cent. The economy grew by 8.6 per cent in 2010-11.