Mumbai: Belying expectations of any relief on interest rate front, Reserve Bank of India on Tuesday hiked the statutory deposits - Cash Reserve Ratio (CRR) - by 0.5 per cent to 7.5 per cent despite inflation falling to a five-year low. CRR is the ratio of interest-free cash reserves mandatorily kept by the banks with the RBI, which had it been unchanged, could have provided banks an option to ease the lending rates. It, however, left the key lending and borrowing rates (repo, reverse repo) and bank rates unchanged. Unveiling the busy season monetary policy, RBI Governor Y V Reddy sent strong signals that the apex bank's hawkish stance would continue in order to ensure price stability, credit quality and orderly conditions in the financial market. Inflation has now come down to 3.07 per cent.

Sensex dips on CRR hike, then recovers

Stock market benchmark Sensex dipped by more than 200 points soon after the Reserve Bank announced a hike in the ratio of cash that banks need to keep with it as mandatory deposits. However, the clarity over the monetary policy led a recovery from the low levels and the Sensex was trading 128.46 points down at 19,849.21 at 1220 hours. The index touched a low of 19,749.70 points, down 227.97 points from yesterday's close.(PTI)