On Tuesday the RBI increased its two key policy rates for the sixth time this year. The repo rate is up 25 basis points to 6.25%. And the reverse repo was also hiked by 25 basis points to 5.25%. The repo is the rate at which the RBI lends to banks while the reverse repo is the rate at which those banks can park cash with it.
What the RBI has left unchanged is the cash reserve ratio, which remains at 6%. The CRR is the percentage of deposits that banks have to keep with the RBI.
The RBI has also tightened India’s mortgage rules. Most significantly, the standard asset provisioning on teaser rates for home loans has been hiked to 2% two percent from 0.4%
Markets experienced volatile trading on Tuesday to end the day flat. The Sensex lost 10 points to close at 20,346. And the Nifty ended with a gain of one point to finish at 6,119.