Mumbai, March 19: India’s central bank Tuesday cut its key short-term lending and borrowing rates by 25 basis points, but left unaltered the reserve ratios that can pump more money into the commercial lending system.
The decision was taken by Reserve Bank of India (RBI) Governor D. Subbarao during a mid-quarter review of the monetary policy for the current fiscal.
The repurchase rate, or the interest on short-term borrowings by commercial banks, has been cut from 7.75 percent to 7.5 percent and the reverse repurchase rate, or interest on short-term lending, automatically stands lowered to 6.5 percent against 6.75 percent.
But with inflation rate still beyond the central bank’s comfort zone, the cash reserve ratio, or the money commercial banks have to retain in the form of liquid assets in proportion to their deposits, has been kept unchanged at 4 percent.
“Since the Reserve Bank’s third quarter review of January 2013, global financial market conditions have improved, but global economic activity has weakened,” the central bank said in a statement.
“On the domestic front, too, growth has decelerated significantly, even as inflation remains at a level that is not conducive for sustained economic growth,” the apex bank said.