RBI (Reserve Bank of India) has cut down the repo rate by 25 basis points from 8.0% to 7.75% while keeping the CRR (cash reserve ratio) unchanged at 4%. The change calls for the right time to the market and corporate waiting for a revival.
As the inflation rate decreased steadily, people were eagerly waiting for a rate cut. The current policy settings have proved efficient by achieving the target of bringing the inflation outcomes below 8% by January 2015.
“The inflationary pressures have been easing since July 2014 with sharp decline in the prices of fruits and vegetables, gradual decrease in the prices of cereals and a large fall in international commodity prices such as crude oil (which is likely to remain low throughout the year)”, said the RBI Governor Raghuram Ranjan.
The move is aimed to smooth liquidity overnight. Also will help to overcome the supply constraints and availability of important inputs such as land, power, infrastructure, minerals, etc.
The reverse repo rate is kept unchanged at 6.75%.
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