While borrowing for buying shares too could become costlier, housing loans may not be impacted as they are not touched by the measures announced by RBI in the third quarter review of monetary policy.

Finance Minister P Chidambaram too said that housing sector would be insulated from the hike in repo rate and risk weightages. "That will bring comfort to the house owners."

In the review, RBI increased provisioning requirement for the four sectors to two per cent. It means that banks now have to keep two paise for every rupee given to these sectors.

Concerned over high inflation rate, RBI Governor Y V Reddy announced hike in overnight repo (short-term lending) rate by 0.25 per cent to 7.5 per cent. A hike in this rate is aimed at increasing the cost of retail and housing loans to prevent overheating in these rapidly growing sectors.

Bankers said on the whole, the policy is dovish and addresses the concerns of inflation. However, there could be a tightening of liquidity leading to rate hikes by some banks.

The objective of the policy was to bring down inflation to 5-5.5 per cent range at the earliest with the medium term goal of 5 per cent, the RBI said.

The Reserve Bank also raised its growth projection for this fiscal to 8.5-9 per cent from 8 per cent, coinciding with revised figures for 2005-06, which put growth rate to 9 per cent against 8.4 per cent estimated earlier. The economy grew by 9.1 per cent in the first half of this fiscal.

RBI keeps bank rate unchanged at 6%

The Monetary and Credit Policy 2006-2007