INDIA CUTS INTEREST RATES AS EXPECTED

NEW DELHI – The Reserve Bank of India (RBI) today cut its repo rate by 25 basis points to 7.25%, in line with market forecasts. The reverse repo rate automatically follows, decreasing to 6.25% from 6.50%. The RBI has now cut by 75 basis points in 2013. Also in line with expectations, the cash reserve ratio (CRR) remained unchanged at 4%. The CRR has remained unchanged since a 25bps reduction in January, designed to infuse liquidity into the banking system. The RBI set out three challenges for monetary policy going forward: to lift growth, prevent upward pressure on inflation expectations; and ensure liquidity allows adequate credit flow to the productive sectors of the economy.