RBI Policy Unexpected

RBI Governer Dr.Subbarao has surprized by hiking CRR by 75 basis points to 5.75% from 5% and will be effective from Feb 13.
Reverse Repo kept unchanged at 3.25%

Monetary Measures

To absorb the excess liquidity nearly to Rs.36000 Cr and 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:
Bank Rate
The Bank Rate has been retained at 6.0 per cent.
Repo Rate
The repo rate under the Liquidity Adjustment Facility (LAF) has been retained at 4.75 per cent.
Reverse Repo Rate
The reverse repo rate under the LAF has been retained at 3.25 per cent.
Cash Reserve Ratio
It has been decided to:

• increase the cash reserve ratio (CRR) of scheduled banks by 75 basis points from 5.0 per cent to 5.75 per cent of their net demand and time liabilities (NDTL) in two stages; the first stage of increase of 50 basis points will be effective the fortnight beginning February 13, 2010, followed by the next stage of increase of 25 basis points effective the fortnight beginning February 27, 2010.

As a result of the increase in the CRR, about Rs. 36,000 crore of excess liquidity will be absorbed from the system.
The Reserve Bank will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.
Expected Outcomes
The expected outcomes of the actions are:
(i)      Reduction in excess liquidity will help anchor inflationary expectations.
(ii)     The recovery process will be supported without compromising price stability.
(iii)    The calibrated exit will align policy instruments with the current and evolving state of the economy.
Monetary Policy 2010-11
The Monetary Policy for 2010-11 will be announced on April 20, 2010.