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RBI cuts repo rate to 6 pc, bank rate to 8 pc and CRR to 10.5 pc

The Reserve Bank of India has today announced a reduction in repo rate from eight per cent to six per cent effective March 3, 1999.

This follows a reduction in bank rate from nine per cent to eight per cent effective close of business hours today.

The RBI also announced a reduction in Cash Reserve Ratio from 11 per cent to 10.5 per cent effective from the fortnight beginning March 13, 1999.

The Reserve Bank's decision to reduce the bank rate effective today and announcement of a reduction in repo rate from Wednesday is largely influenced by lower rate of inflation in recent weeks coupled with slow bank credit off-take, according to Reserve Bank governor Dr Bimal Jalan.

Responding to the decision on interest rates, Dr Jalan said that he had already indicated his preference earlier for lower interest rates provided the conditions were right. The conditions were now right for such a move in view of the next year's lower borrowing programme announced by the government in the Budget proposals, he felt.

Asked about the exchange rate, the governor did not make any specific comments except saying that there was no change in the Reserve Bank's policy in regard to management of the exchange rate.

Meanwhile, several commercial banks mainly from the public sector are gearing up themselves to face the lower interest rate regime in near future and announce a cut in their respective Prime Lending Rate.

Analysts said the cut was expected much earlier but the Reserve Bank was waiting for the Union Budget to give a direction in this regard. The cut will have a downward impact in call money rate.

Earlier during the day, the RBI announced one percentage cut in bank rate from nine to eight per cent effective today and two percentage reduction in repo rate from eight to six per cent with effect from March 3. The Central Bank also reduced the Cash Reserve Ratio from 11 to 10.5 per cent effective from the fortnight beginning on March 13.

Budget 1999-2000

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