The repo rate - the interest rate at which banks borrow short term money from the RBI and is used to price retail loans - was increased to 7.50 percent against expectations of the value being left unchanged to support market liquidity.
In the first monetary policy review since taking office on Sept 4, RBI Governor Raghuram Rajan however reduced the marginal standing facility (MSF) rate by 75 basis points to 9.50 percent, hinting at greater confidence in the rupee.
The cash reserve ratio or the amount of money banks have to park with the RBI, was also kept unchanged at 4 percent.
Markets however reacted unfavourably the unexpected hawkish move, as the BSE Sensex plunged over 550 points with banking stocks bearing the brunt and the Indian rupee also dropped sharply to 62.46 per dollar.
--IBNS (Posted on 20-09-2013)