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India's Reserve Bank wary on inflation risks

Shift in reverse repo rate hints at tighter monetary policy

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Customers begin to worry about inflation in India   © Reuters

MUMBAI -- The Reserve Bank of India-led Monetary Policy Committee on Thursday decided to keep the repo rate unchanged at 6.25% as it continues to see upside risks to inflation from a probable unfavorable monsoon.

However, the six-member committee increased the reverse repo rate by 25 basis points to 6% in a bid to suck out excess liquidity from banks which has built up in deposits following the government's demonetization in November. The cash reserve ratio remains at 4%.

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