The Reserve Bank of India on Tuesday raised its key policy rates for the fourth time this year, taking more steps to tame rising prices amid a strong rebound in the economy.

But bankers said that they don't see lending rates going up immediately as the RBI rate hike was on expected lines.

As widely expected, the RBI raised the repo rate by 25 basis points (bps) to 5. 75 per cent in its credit policy review. But the reverse repo rate has been hiked by a slightly higher-than-expected 50 bps to 4.5 per cent. The cash reserve ratio has been kept unchanged at 6 per cent. The rate hikes are effective on a immediate basis. 

Keki Mistry, vice chairman and CEO of HDFC, said, “The repo rate hike was on the expected lines. It was already factored in and I don’t see any immediate hike in interest rates.”  (Watch: No immediate impact on interest rates: HDFC) 

“But one more round of hike could see banks revise up their interest rates,” he added.

Chanda Kochhar, MD & CEO of ICICI Bank, said, in the immediate future you would not see any movement in interest rates but over the period of time it will move up.

One basis point is one-hundredth of a percentage point. The repo rate is the rate at which the RBI infuses cash into the system or banks borrow from the RBI. The reverse repo rate is the rate at which the central bank drains cash from the banking system, or the rate at which banks lend to the RBI. (Watch: FM endorses RBI’s decision)

In an NDTV poll, 12 out of 15 bankers expected a 25 bps hike in repo and reverse repo rates.

Since the RBI did not spring any negative surprise by going for a steep rate hike, Indian markets reacted mildly positively  to the rate hike announcement. It was trading flat-to-positive in the early noon trade. 

In another significant move, the RBI said it will now undertake mid-quarter policy reviews, on the lines of major
central banks abroad, "to take the surprise element out of the off-cycle actions." These reviews will be conducted at an interval of about one and a half months, after each quarterly review, the central bank said.

Montek Singh Ahluwalia, deputy chairman of Planning Commission, said that he does not see the real economy to be hit by RBI’s rate move. (Read: RBI rate hike to check inflation, not hurt growth: FM)

Earlier this month on July 2, the RBI in an unscheduled move had raised the key rates by 25 bps to tame inflation, which is still in double-digits, led by high food prices. Inflation for June stood at 10.55 per cent and it is expected to stay in double-digits at least for another couple of months. The July inflation is likely to move further up as the full impact of the oil price hike which was effective from June 25 would be felt during the month.

Despite a sharp rebound in the domestic economy, the RBI has refrained from steep hikes, partly due to an optimistic inflation outlook and fears that a big rise in interest rates will derail the economic recovery process. The tight liquidity in the banking system also had a bearing on its decisions.

Prime Minister Manmohan Singh recently said that expects inflation to ease and reach 6 per cent by December. The government hopes that a normal monsoon will boost supplies of summer-sown crops and help bring down food prices.

The central bank raised its projection for wholesale price inflation for March end to 6 per cent from earlier estimate of 5.5 per cent. It also raised its economic growth target for the year to 8.5 per cent.