India’s Central Bank the Reserve Bank of India today raised Interest rates to tame Inflation.The Reserve Bank, on Tuesday, raised its short-term lending and borrowing rates by 0.25 per cent and 0.50 per cent respectively, to bring inflation to six per cent by March 2011 from the current double digits rate. But this move is expected put pressure on banks’ interest rates.

In its monetary review, the central bank, however, kept its cash reserve ratio (CRR), the cash which banks are required to keep with RBI, unchanged.The RBI raised upwards the inflation target from 5.5 per cent to six per cent and said that economy will grow by 8.5 per cent, up from earlier projection of 8 per cent, this fiscal.

The increase in short-term lending rate (repo) to 5.75 per cent and short-term borrowing rate (reverse repo) to 4.5 per cent will be effective immediately.

Earlier this month, RBI had hiked repo and reverse repo rates by 0.25 per cent as inflation remained above 10 per cent for the fifth month in succession. Prior to this, RBI had raised thrice its key rates, since January.

The BSE benchmark Sensex gained nearly 76 points on Tuesday on fund-based buying in heavyweight stocks, particularly financial companies, after the RBI’s quarterly credit policy matched with market expectations.

The broad-based National Stock Exchange index Nifty rose by 19.95 points to 5,438.55 at the same time.