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Reserve Bank of India cuts rates

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Reserve Bank of India cuts rates

The ReserveBank of India on April 5 decided to cut the policy repo rate under the liquidityadjustment facility by 25 basis points to 6.5%.

The central bank also reduced the minimum daily maintenanceof the cash reserve ratio to 90% of the requirement from 95%, effective April16. The cash reserve ratio was kept at 4% of the net demand and timeliabilities.

The regulator also said it will continue to offer liquidityas needed but will progressively lower the average ex ante liquidity deficit inthe system from 1% of net demand and time liabilities to a position closer toneutrality.

At the same time, the bank decided to narrow the policy ratecorridor to plus or minus 50 basis points from plus or minus 100 basis pointsby cutting the marginal standing facility rate by 75 basis points andincreasing the reverse repo rate by 25 basis points. The move aims to ensurefiner alignment of the weighted average call rate with the repo rate.

The reverse repo rate under the liquidity adjustmentfacility was adjusted to 6%, while the marginal standing facility was adjustedto 7%. The bank rate also stands at 7%.