India's new central bank chief orders surprise rate hike
MUMBAI (AFP) - India's new central bank governor surprised markets on Friday with a bold decision to hike interest rates on fears of rising inflation, triggering sharp falls on the stock market.
Reserve Bank of India (RBI) chief Raghuram Rajan, who had earlier warned he was prepared to be unpopular, increased the benchmark interest lending rate to 7.50 per cent from 7.25 at his first policy review meeting since taking the reins.
The Bombay Stock Exchange's index of leading shares fell by 2.88 per cent to a day's low of 20,051.43 points, led by a tumble in banking stocks. The Sensex recovered slightly in early afternoon to 20,183.60 points.
"Bringing down inflation to more tolerable levels warrants raising the repo rate by 25 basis points immediately," Mr Rajan said.