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The Reserve of India (RBI) has announced to cut the short term lending rate (repo rate) by 100 basis point to 8 per cent. The recent move is supposed to be a part of a series of measures by RBI to moderate inflation and ensure economic growth. According to finance minister P Chidambaram, the decision of RBI to reduce interest rates by 1 per cent will definitely benefit the borrowers and investors and boost confidence in the economy.
The RBI has recently taken a number of measures to maintain domestic and foreign exchange liquidity. The RBI has slashed the Cash Reserve Ratio (CRR) by 250 basis points unlocking Rs 100,000 crore (Rs 1,000 billion) into the financial system. It has also implemented cuts on P notes. Like all the other countries of the world India has also been affected by global financial crisis. The country is feeling the heat of global liquidity constraint.
In a statement issued to the media, RBI claimed to keep a close eye on the global monetary and liquidity conditions. It aims to maintain domestic macroeconomic and financial stability in the context of the global financial crisis. RBI has assured of taking more measures in this respect.
