Well, we end the month on an interesting note. The Reserve Bank of India announced its credit policy today. With strong global inflationary pressures and high oil prices, everyone wanted to see the direction the central bank would give to interest rates. But with inflation at 4.41% (July 14), the RBI did not tamper much with interest rates.
The Cash Reserve Ratio (CRR) has been hiked by 50 basis points from 6.5% to 7%. This is the amount that commercial banks need to deposit with the RBI. Nothing else has been touched. The repo ( 7.75%), reverse repo (6%) and bank rates (6%) have been left unchanged.
The Rs 3,000 crore reserve cap will be removed from August 6, 2007. This was imposed on daily reverse repo (overnight borrowing) transactions.
The FY08 GDP forecast has been retained at 8.5%.
The RBI did cite the rising commodity prices, particularly oil, as a potential threat to inflation.
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