The Reserve Bank of India (RBI), has cut the repo rate and reverse repo rate by 100 basis points (bps), each to 6.5% and 5% respectively. (100 bps = 1%)
The CRR, or cash reserve ratio and SLR, or statutory liquidity ratio have been left unchanged. The RBI Governor, D Subbarao, said reverse repo and repo rate cut will signal banks’ lending rates cut.
Subbarao said, India’s Gross Domestic Product or GDP growth has moderated in first-half of 2009, and assured that liquidity situation more than comfortable. However, decline in inflation is sharper than expected and fuel price cut should further ease inflationary pressure.
The Governor said first time in seven years exports have declined in absolute terms, adding that emerging economies will be affected only marginally.