This is the second time in less than two weeks that RBI has revised the repo rate to contain inflation. Before that, the RBI had touched the repo rate 14 months earlier. Also, only last month had the CRR been increased by 50 basis points (100 basis points = 1%).

RBI’s rate hike is expected to force banks to raise interest rates as well as deposit rates. They will affect all those willing to borrow money to buy a house, or a car. It will also hurt consumers who have taken home loans on a floating rate of interest. It might curb some industrial activity, as the consumer loans are also expected to become costlier. Higher rates also mean corporates now have to pay more as interest costs for their borrowings. "The question is not if rates will go up, but by how much," said a senior official with a domestic financial house.

The good news last time was that the largest public lender, State Bank of India, had refrained from modifying any interest rates. However, the double whammy by RBI this time might make things a little different.