RBI lowers repo rate by 25 basis points |
The Reserve Bank of India (RBI) on April 5, 2016, cut its policy interest rate by an expected 25 basis points, bringing it to 6.5%, the lowest since January 2011.The RBI also introduced a host of measures to smoothen liquidity supply so banks can lend to productive sectors.The cut was broadly in line with expectations. However, the stock market reacted negatively and the BSE index, Sensex, was down nearly 300 points.Given weak private investment in the face of low capacity utilisation, a reduction in the policy rate by 0.25 per cent will help strengthen growth, RBI Governor Raghuram Rajan said in the first bi-monthly monetary policy review for the 2016-17 fiscal, which began on April 1.Rajan also took a host of measures on the liquidity front, starting with the narrowing of the policy rate corridor to 0.50 per cent from the earlier 1 percentage point, which resulted in the reverse repo rate - at which banks can park excess funds with the RBI - being reset at 6 per cent.The policy said the average overnight borrowings by banks have increased to Rs 1,935 billion in March from Rs 1,345 billion in January.
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