Mumbai: The Reserve Bank of India has decided to increase the bank rate to 9.5 per cent with immediate effect. RBI said in a notification that this increase should be viewed and understood as one-time technical adjustment to align the Bank Rate with the marginal standing facility (MSF) rate rather than a change in the monetary policy stance.

The Bank Rate, which is the standard rate at which the RBI buys or re-discounts bills of exchange or other commercial paper, is presently used as a penal rate, which the banks have to pay for their failure to meet the mandatory Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

The Bank Rate, which has been increased to 9.50 per cent, was kept unchanged since April 2003.