The Reserve Bank of India (RBI) on Tuesday slashed the short term lending (Repo) rate by 0.25 percent to 7.75 percent, a move that will reduce home, auto and corporate loans.
The Reverse Repo Rate (RRR) under the liquidity adjustment facility, determined with a spread of 100 basis points below the repo rate, stands automatically adjusted to 6.75 percent.
The RBI also slashed the Cash Reserve Ratio (CRR) by 0.25 percent to 4 percent.
This is the first time in nine months that the RBI is reducing its key lending rate. The last time the apex bank cut the rate was in April 2012, when it was reduced by a more than expected 50 basis points (bps).
The RBI yesterday said that recent reforms have reduced the immediate risks for the economy, but emphasised on the need for more measures to restore investor confidence. The RBI has also revised India's GDP forecast to 5.5 per cent in 2012-13, as against 5.7 per cent estimated earlier.
Flagging concerns about fiscal and external imbalances in the economy, the apex bank said that more reforms are required, especially in road and power sectors, to remove investment bottlenecks. (ANI)