The Reserve Bank of India (RBI) on Tuesday cut the repo rate by 25 basis points to 7.5 per cent in its mid-quarter review of the monetary policy. The move is aimed to spur growth and revive investment.
The central bank made it clear that “the headroom for further monetary easing remains quite limited” owing to high food inflation and current account deficit.
This is the second time in the calendar year the RBI has cut the repo rate, at which banks borrow funds from the central bank.
Consequently, the reverse repo (the rate at which banks park their surplus funds with the RBI) came down to 6.5 per cent from the earlier 6.75 per cent. The Cash Reserve Ratio (CRR) has been retained at 4 per cent.
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