Reserve Bank of India has cut Repurchase Rate, or the interest on short-term borrowings by commercial banks from 7.75 percent to 7.5 percent and the Reverse Repurchase Rate, or interest on short-term lending to 6.5 percent against 6.75 percent.
Reserve Bank of India (RBI) Governor D. Subbarao took the decision during a mid-quarter review of the monetary policy for the current fiscal on Tuesday.
India, Asia's 3rd largest economy is growing at its slowest at around 5% in the fiscal year ending this month and this move by RBI is to revive the growth a little in next year.
However, India's central bank left the Cash Reserve Ratio, or the money commercial banks have to retain in the form of liquid assets in proportion to their deposits unchanged at 4 percent.
Central Bank released a statement that read, "Since the Reserve Bank's third quarter review of January 2013, global financial market conditions have improved, but global economic activity has weakened".
"On the domestic front, too, growth has decelerated significantly, even as inflation remains at a level that is not conducive for sustained economic growth," it added.
This is the 2nd policy rate cut by the RBI this year. The bank earlier reduced the Repo Rate by 25 basis points to 7.75 per cent in January.
(with inputs from IANS)
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