The Reserve Bank of India has raised the Repo and Reverse Repo rates by 25 basis points with immediate effect to contain inflation. While Repo rate has been raised to 5.50 per cent, the Reverse Repo rate has been hiked to 4 per cent. Repo and Reverse Repo rates are rates at which the RBI lends and borrows short-term funds from commercial banks. The move will raise cost of funds for banks and temper demand for loans, and in turn, consumer spending. Finance Minister Pranab Mukherjee has described the RBI move to contain price rise as desirable in view of tight credit situation and rising inflation. Responding to the mid-term policy action taken by the RBI, he said those measures were desirable given that food inflation had risen and credit situation was tight. The bankers have said corporate, home and auto loans are expected to remain unchanged despite the RBI hiking its the short-term lending and borrowing rates. SBI Chairman O P Bhatt told reporters that interest rates are unlikely to be impacted till July 27 when the Reserve Bank is expected to take more measures in its monetary review. PNB chairman K R Kamath also said that the RBI move may not have any direct impact on the interest rates.