The Reserve Bank of India has announced the long awaited rate cut. It has reduced the repo rate by 50 basis points to 5% and cut the reverse repo rate by 50 basis points to 3.5% with immediate effect.
This cut is mainly because of lower GDP data & inflation which is likely to go towards southwards. Most of the market analyst believes that this is a much delayed step taken from RBI. Market won’t react much positive Up-side really because of this move as broadly it is in line with expectation.
However, when the RBI Governor D Subbarao had met with leading bankers on February 27 to discuss the prevailing economic and credit condition, they informed him that liquidity was at a comfortable level and any rate cut by the central bank would not translate into a lending rate cut by the banks.
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