RBI lowers repo rate by 25 basis points to 6.5% - The Reserve Bank of India (RBI- Navbharat Times Photodhamal

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The Reserve Bank of India (RBI) on Tuesday (April 5) cut its policy interest rate by an expected 25 basis points, bringing it to 6.5%, the lowest since January 2011.

In This Pic : RBI

Pic Courtesy : BCCL - Non Copyright

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"We see inflation slowing modestly and remaining around 5% for fiscal year 2017 with small inter-quarter variations," RBI governor Raghuram Rajan said.

In This Pic : Raghuram Rajan

Pic Courtesy : BCCL

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The RBI retained the growth forecast of 7.6% in fiscal 2017. It also increased the reverse repo rate by 25 basis points to 6% on account of new rate corridor and kept the cash reserve ratio unchanged at 4%.

In This Pic : Raghuram Rajan

Pic Courtesy : BCCL

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With inflation easing to 5.18% in February and a central budget that kept both borrowing and spending in check, the RBI had room to make its first cut since September, thus resuming an easing cycle that was in full swing last year.

In This Pic : RBI

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Last year, the RBI had reduced the repo rate by 125 basis points (bps) in total, but it had been frustrated by commercial banks' failure to pass on the full benefits of the reduced rate to the wider economy. Banks only passed on about half of the RBI's rate reductions to borrowers, by saying tight liquidity in the financial system had their hands tied.

In This Pic : Raghuram Rajan

Pic Courtesy : BCCL