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RBI hikes bank rate to 9.5% for Urban Co-op Banks

The Reserve Bank of India has hiked bank rate for Primary (urban) Co-operative Banks by 3.5% to 9.5% with effective from February 13, 2012.

“…it is determined that the bank rate should normally stay aligned to the MSF (marginal standing facility) rate. “Accordingly, it has been decided that with effect from the close of business of February 13, 2012, the bank rate (for UCBs) will stand increased by 350 basis points, from 6 per cent per annum to 9.50 per cent per annum,” RBI said in a notification today.

RBI Logo Reserve Bank of India

Reserve Bank of India

As the bank rate is discount rate, “It should technically be higher than the policy repo rate,” said a notification issued to CEOs of all Primary (Urban) Co-operative Banks. The current repo rate of RBI is 8.5% whereas, reverse repo rate is 7.5%. it is used as a penal rate which the banks have to pay for their failure to meet the necessary Cash Reserve Ratio (CRR) and Statuary Liquidity Ratio (SLR).

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