The RBI on Wednesday raised its key lending rate by 40 basis points to 4.40 per cent with immediate effect. The central bank also hiked the cash reserve ratio by 50 basis points. The decision was taken by the monetary policy committee (MPC) in an off-cycle meeting with the central board held May 2-4.

RBI Governor Shaktikanta Das said the decision was taken in view of rising inflation, geo-political tensions, high crude oil prices and shortage of commodities globally, which have impacted Indian economy.

The RBI cautioned that the economy faces global spillovers risks from geopolitical tensions, elevated commodity prices and moderating external demand. For top quotes from RBI Governor Shaktikanta Das, please click here. “The decision today to raise repo rate may be seen as reversal of rate action of May 2020. Last month, we had set out a stance of withdrawal of accommodation. Today's action needs to be seen in line with that action,” Mr Das said. “I would like to emphasise that the monetary policy action is aimed at containing inflation spike and re-anchoring inflation expectation,” he said, adding that "high inflation is known as detrimental to growth".