India favours slow growth to curb inflation
The Reserve Bank of India (RBI) sent a clear message on Tuesday that it wants to cool the double-digit inflation even if it means a slower economic growth by increasing both Cash Reserve Ratio (CRR) and repo rate for the third time in two months, analysts said.
CRR is the portion of deposits commercial banks must keep with central bank, while repo rate is the rate of interest at which the central bank lends funds to banks.
The RBI's decision will undoubtedly bring pressure on commercial banks to further hike their lending rates, which in turn will discourage impact borrowers and markets already hit by a 11.89 percent inflation, a 13-year high, they pointed out.
The Prime Lending Rate (PLR) of most state-owned banks in India ranges from 12.75 per cent to 13.25 per cent, while private banks charge much higher with PLR of over 15 per cent.
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