The Reserve Bank of India (RBI) eased its tight monetary policy by slashing its key interest rates by 0.25% and released Rs 18,000 crore additional liquidity into the system to stimulate growth through reduced cost of borrowing.
RBI cut the Repo Rate by 0.25% to 7.75% and Cash Reserve Ratio (CRR) by similar margin to 4%.
The cut in repo rate is expected to bring down the borrowing rates individuals and corporate. The slash in CRR, which is the portion of deposits that banks have to keep with RBI, would enhance the availability of funds.
The RBI, however, has cut down the growth projections for the current financial year to 5.5% from its earlier estimate of 5.8%.