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In a tough stance by RBI to regulate inflation, has raised repo rate and reverse repo rates (Short term lending and borrowing rates) by 50 bps for the third time in three months. This will lead to the increase in the interest rates of the home and car loans provided by other banks.
Now the repo rate has become 8 % from the previous 7.5 and the reverse repo has become 7 % from the previous value of 6.5. However RBI didn't change the CRR which is kept at 6. RBI has raised the rates against the recommendation by the other banks due to the high inflationary pressures. Even though there are signs of moderation, inflation continues to the guiding factor. "Despite good monsoon and price moderation, risk to food inflation still remains," Subbarao said. RBI's unexpected move has reflected in the share market by sharp decline in sensex point.