RBI

ECONOMY

RBI cuts policy rates by 0.25 pc

Jan 29, 2013

               

Home and Auto loans would  become cheaper as Reserve Bank cuts Repo and CRR by 25 basis points in its quarterly monetary policy review and Projects GDP growth to 5.5 from the earlier estimate of 5.8 per cent.

Shedding its 9-month long hawkish monetary policy stance, the Reserve Bank today slashed its key interest rates by 0.25 per cent and released Rs 18,000 crore additional liquidity into the system to perk up growth through reduced cost of borrowing.

RBI Governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate called repo by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.

While repo rate cut will reduce the cost of borrowing for individuals and corporates, the reduction in CRR, which is the portion of deposits that banks have to park with RBI, would improve the availability of funds.

“The stance of monetary policy in this review is intended to provide an appropriate interest rate environment to support growth as inflation risks moderate,” Subbarao said .

The RBI, however, has reduced the growth projections for the current financial year to 5.5 per cent from its earlier estimate of 5.8 per cent.On inflation, it moderated the rate to 6.8 per cent for March-end from earlier projection of 7.5 per cent.