RBI revises Bank Rate to control Inflation.

The Reserve Bank of India(RBI) has come up in changing its credit policy by making changes in Bank Repo and Reverse rate rates, CRR to curb the growing Inflation in India. The current inflation rate is said to be around 9.90%, which is pressured the RBI to take necessary steps in raising the annual monetary credit rate policy.

Even the Food Inflation prices has touched 20% in January 2010 but marginally falling down and stood currently at 16% approximately.

To control these situation the RBI has raised the Repo rate(The rate the Apex bank lends the money) and Reverese Repo rate (The rate at which RBI borrow the money) by 25 basic points which gives and direct impact on the inflation. The RBI is expecting an growth of 8.2% by the end of current fiscal year.

For an better understanding here is the Current Rates mentioned in the below table.

Credit Policy Rates	Old (20 / 4 / 2010)	New (27/09/2011)	Percentage change compared
Bank Rate	6%	6%	Nil
Repo Rate	5.25%	8.25%	3%
Reverse Repo Rate	3.75%	7.25%	3.50%
Cash Reserve Ratio(CRR)	6%	6%	Nil
Statutory Liquidity Ratio (SLR)	25%	24%	(1%)

By Increasing the CRR(Cash Reserve Ratio), the credit scenario can be changed, because Cash reserve ratio is an ratio which a bank should maintain mandatory an liquid amount of 6%, which means the amount in the system will be drain out and will have an impact on Inflation.

Basic concept of this is the Increase in rates will increase in deposits, so as savings and which will lead in less expenditure, through which Inflation can be controlled.

On the changes of this rate the RBI is expecting to collect an amount of about Rs12,500 crores.

But another changes in this rate are expected in 2-3 months to balance the exchange rates.