New Delhi: In keeping with demands and expectations by industry, the Reserve Bank of India on Tuesday cut the benchmark repo rate, or the rate at which banks borrow from the central bank, by 25 basis points to 7.25%. The latest action takes the number of rate cuts this calendar year to three; the central bank had cut the repo rate by 25 basis point cut earlier in January and March; the total reduction in interest rate is now 75 basis points. One basis point is one-hundredth of a percentage point. Both CRR and SLR rates have been left unchanged.
“The policy today is neither conservative nor aggressive,” RBI Governor Raghuram Rajan said at a press conference today, calling the policy move a “Goldilocks policy, just right”. The governor also denied that there was any pressure from the government to cut rates. “We play together,” he said. “There is a misinformation that we want to keep interest rates high because we want to look strong and bold, but there is no point in looking bold if its kills the economy,” he added.
Benchmark indices have slipped further and are witnessing extreme selling pressure weighed down by rate-sensitive sectors, mainly financials after the RBI at its monetary policy review signaled that further rate cuts could be delayed. As a result sensex slips more than 300 point in the early hour of the day.