Hike in repo rate to curb inflation: FM

The government said on Wednesday hike in overnight lending rate by 0.25 per cent by the Reserve Bank of India would tame inflation, but not affect India's growth story.

"Monetary policy takes some time to work...it would have a favourable impact on bringing down inflation," Finance Minister P Chidambaram told reporters in New Delhi.

Hike in provisioning requirement by RBI for loans to real estate, capital market, personal loans (barring housing) and against credit cards would bring comfort to the house owners, he said.

"It is along expected lines. (RBI) Governor has increased repo rate and risk weightages for four sectors excluding the housing

sector. That will bring comfort to the house owners, buyers," the finance minister said.

On rising interest rates, he said: "Interest rate is a small part of the cost of industry. I hope industry and business will continue to go with their investment plans."

Calling banks to moderate credit growth, the finance minister said, adding borrowing requirements of productive sector must be ensured.

"I intend to meet public sector bankers on February 5 to see that there is no shortage of credit for the productive sectors," he said.

The Monetary and Credit Policy 2006-2007