Reserve Bank of India (RBI) has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5 per cent to 7.25 per cent with immediate effect.
It was announced in the second bi-monthly policy of RBI. It says that
- Cash reserve ratio (CRR) of scheduled banks has kept unchanged at 4 per cent of net demand and time liabilities (NDTL).
- Continuation of providing liquidity under overnight repos at 0.25 per cent of bankwise NDTL at the LAF repo rate.
- Liquidity under 14-day term repos as well as longer-term repos of up to 0.75 per cent of NDTL of the banking system through auctions.
- Continuation with overnight/term variable rate repos and reverse repos to smooth liquidity.
This the third time RBI has cut interest rates in 2015. RBI has reduced the rates in order to take advantage of subdued inflation and to give more support to an economy.