c

42. On the basis of the current assessment and in line with the policy stance as outlined in
Section III, the Reserve Bank announces the following policy measures:

O
 

43. The Bank Rate has been retained at 6.0 per cent.

 

44. It has been decided to:

ác increase the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points
from 5.0 per cent to 5.25 per cent with immediate effect.

 
 

45. It has been decided to:

ác increase the reverse repo rate under the LAF by 25 basis points from 3.5 per cent to 3.75
per cent with immediate effect.

u 
  

46. It has been decided to:

 ác increase the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 5.75 per
cent to 6.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight
beginning April 24, 2010.

47. As a result of the increase in the CRR, about Rs. 12,500 crore of excess liquidity will be
absorbed from the system.

48. The Reserve Bank will continue to monitor macroeconomic conditions, particularly the price
situation, closely and take further action as warranted.

A typical central bank has several interest rates or monetary policy tools it can set to influence
markets.

ác ÿarginal lending rate (currently 1.75% in the Eurozone) ± a fixed rate for institutions to
borrow money from the central bank. (In the USA this is called the discount rate).
ác ÿain refinancing rate (1.00% in the Eurozone) ± the publicly visible interest rate the
central bank announces. It is also known as u
uu  and serves as a bidding
floor for refinancing loans. (In the USA this is called the federal funds rate).
ác Deposit rate (0.25% in the Eurozone) ± the rate parties receive for deposits at the central
bank.

These rates directly affect the rates in the money market, the market for short term loans.
c