RBI hikes MSF & Bank rates

In late night action, when the pot-bellied Dalal Street brokers were just getting into their beds Monday night, RBI quietly announced hike in the MSF rate and the Bank Rate.

The Marginal Standing Facility is the rate at which the Banks can borrow from the Central Bank against Government Securities. It was hiked by 200 basis points to 10.25%.

The Bank Rate, which was at 8.25%, was also hiked by 200 basis points to 10.25%.

The move is aimed at stabilising the rupee. The Bonds could sell off and see a rise in the yield. The Rupee could appreciate.

The markets are likely to be rudely surprised.

Get ready for higher interests rate now and more pain for the markets Tuesday morning.