RBI policy review: Rajan slashes lending rate by 25 basis points

New Delhi: Reserve Bank Of India (RBI) cut its key lending rate by 25 basis points (bps) to 6.5% from 6.75 percent on Tuesday.

During the monetary policy review, Rajan adjusted the reverse repurchase rate upward to 6 percent from 5.75 percent.

The central bank had last cut its short-term lending rate by 50 basis points to 6.75 percent in September last year.

"Inflation has evolved along the projected trajectory and the target set for January 2016 was met with a marginal undershoot," Rajan said in his policy statement, adding that retail inflation was expected to decelerate modestly and remain around 5 percent in this fiscal.

Among the two key instruments to directly regulate the money flow in the system, the cash reserve ratio (CRR), which is the quantum of liquid funds against deposits which commercial banks have to hold, has been left unchanged at 4 percent.

But the minimum daily maintenance of CRR has been cut to 90 percent from 95 percent.

Similarly, the statutory liquidity ratio, or the value of specified securities which commercial banks have to subscribe to, stands at 21.25 percent, effective from April 2.

The Confederation of Indian Industry (CII) said the 25 bps cut signals that the central bank was continuing to maintain an accommodative stance.

With inputs from IANS