La Central Bank of India cut interest rates today. It is about first decision of its kind in the last three years: an important trend reversal compared to the policy of credit crunch followed in recent times, the purpose of which was to deal with a still too high rate of inflation.
The Reserve Bank of India (RBI) has thus established a reduction of 50 basis points (equal to half a percentage point) of both the "repo” (the rate at which the Bank lends money to commercial banks) and the “reverse repos” (the interest rate charged to credit institutions when they deposit their assets with the Central Bank). Both rates have gone down 8% and 7% respectively.
Between March 2010 and October 2011, the Bank had intervened 13 times against the overheating of the economy and the high cost of living, but in the last three sessions it had left rates unchanged. The cut expected by analysts was a quarter of a point.
