New Delhi:
The Reserve Bank of India on Wednesday lowered its key rates by as inflation pressures eased significantly. The central bank cut its repo and reverse repo rates by 50 bps each. The rate cuts would be effective immediately.
The reverse repo rate, or the rate at which lends to banks, was cut by 50 bps to 5 per cent, from 5.5 per cent. The reverse repo rate, or the rate at which it borrows from banks, was lowered by 50 bps to 3.5 per cent from 4 per cent.
The rate cuts would encourage banks to lend, it said.
The central bank however said that it has asked banks to monitor loans and asset quality as concerns grow over non-performing assets in the banking system. The RBI also said that it expects the Indian economy to slowdown further as global economy reels under increased uncertainly.
HDFC said that it would pass on the rate cuts to customers. IndusInd Bank however said that it expected a 100 bps cut by the RBI.
The banking shares are likely to see a one-day rally tomorrow, according to Emkay.