RBI cuts short-term rates; keeps Bank Rate, CRR unchanged

The Reserve Bank of India today cut its key short-term (repo and reverse repo) rates by 25 basis points each to help bank lower lending rates further and kick-start growth in key sectors of the sagging economy.

D Subbarao, Governor, Reserve Bank of IndiaThe RBI, however, kept the Bank Rate – the rate at which banks lend longer-term - and the cash reserve ratio for scheduled banks unchanged at 6.0 per cent and 5.0 per cent, respectively.

The repo rate, at which the Reserve Bank of India (RBI) injects liquidity into the banking system, will be cut from 5.00 per cent to 4.75 per cent, and the reverse repo rate, at which it absorbs excess cash from banks, will be reduced from 3.50 per cent to 3.25 per cent, with immediate effect.

The cash reserve ratio (CRR) of scheduled banks has been retained unchanged at 5.0 per cent of net demand and time liabilities (NDTL), the RBI said in its annual monetary policy statement.

The Reserve Bank has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant.

''The Reserve Bank retains the option to conduct overnight or longer term repo/reverse repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibly including the right to accept or reject tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient use of the LAF in daily liquidity management,'' the central bank said.