The Reserve Bank of India (RBI) has declared a hike in cash reserve ratio (SRR) by 50 basis points and the short-term lending (repo) rate by a same margin to curb rising inflation.

The step, which is likely to absorb an estimated Rs 200 billion could make loans costlier for housing, car and personal expenses as also to the industry.

The statement comes close on the heels of RBI governor, Y V Reddy discussing with prime minister, Manmohan Singh and finance minister, P Chidambaram the existing inflation scenario.

Reflecting the finance ministry’s outlook that monetary plan would be the first line of defence against inflation that zoomed to a 13-year high of 11.05%, the RBI after strong session on Tuesday set up the new standards, part of which would be effected in installments.

In a precursor to raising the CRR from 8.25% to 8.75% in two installments starting July 5 and the repo rate from 8% to 8.5% with immediate effect, Reddy said on Monday that the apex bank would do every thing to relieve the inflationary forces.

While expressing worry over rising inflation, RBI said, “Besides oil prices there are some underlying inflationary pressures impacting inflation in India.”