The Reserve Bank today slashed benchmark short term lending rate by 0.25 per cent to 6 per cent citing reduction in upside risk to inflation, a move that will lower EMIs for home, auto and personal loans.
This is the first rate cut since October 2016 and the interest rate is now at 6-year low.
In line with record low retail inflation, the RBI Governor headed Monetary Policy Committee (MPC) cut policy repo rate by 25 basis points to 6 per cent and the reverse repo by similar proportion to 5.75 per cent.
The MPC has also decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 per cent.
It stressed on urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana.
RBI said it is working in close coordination with the government to resolve large stressed corporate borrowings and recapitalise public sector banks.