On Tuesday, Raghuram Rajan, the Governor of Reserve Bank of India (RBI) has cut the repo rate by 25 basis points to 7.25% from 7.5% in the central bank’s monetary policy review.
However, the central bank has kept the Cash Reserve Ratio (CRR) unchanged at 4%.
According to RBI’s statement, “Strong food policy and management will be important to help keep inflation and inflationary expectations contained over the near term. Furthermore, monetary easing can only create the enabling conditions for a fuller government policy thrust that hinges around a step up in public investment in several areas that can also crowd in private investment.”
“A targeted infusion of bank capital into scheduled public sector commercial banks, especially those that implement concerted strategies to clean up stressed assets, is also warranted so that adequate credit flows to the productive sectors as investment picks up,” the bank said.