The Reserve Bank of India, RBI today hiked the short-term lending (repo) rate by 0.25 per cent to 7.75 per cent. It is a step that will make corporate and consumer loans more expensive.

The RBI Governor Raghuram Rajan brought down the cost of short-term funds for banks by slashing the marginal standing facility (MSF) rate by a similar quantum to 8.75 per cent.

The central bank reduced the growth forecast for the current fiscal to 5 per cent from 5.5 per cent projected earlier. Economic growth fell to a decade-low of 5 per cent in the previous financial year.

The RBI left other rates unchanged, such as the cash reserve ratio at 4 per cent, and Mandatory holdings in government securities and other liquid assets as a solvency measure (SLR) at 23 per cent.

However, the Governor doubled the borrowing limit of banks against their cash positions or Net demand and time liability (NDTL ) to 0.5 per cent for both 7-day and 14-day repos, with immediate to increase liquidity in the system.