RBI hikes key interest rate

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MUMBAI, July 29 (AFP): Reserve Bank of India (RBI) today raised its key short-term lending rate by half-a-percentage point in an aggressive bid to tame inflation riding at a 13-year high, pushing shares down sharply.

Indian shares slumped 3.6 per cent after the bank announced the hike in the repo rate, at which commercial banks borrow funds from the central bank, amid investor fears that the move it would hit corporate profits.

The repo rate was hiked by 50 basis points to nine per cent, while the cash reserve ratio-the sum banks must keep on deposit-was increased by a quarter point to nine per cent.