Agra, Jan 29 (IANS) The cut in key policy rates by the central bank will improve liquidity and catalyse economic growth, Commerce and Industry Minister Anand Sharma said Tuesday.
"It is a positive step which will infuse liquidity and help catalyse economic growth," Sharma said while reacting to the monetary policy announced the Reserve Bank of India (RBI).
In its third quarter review of the monetary policy for the financial year 2012-13, the RBI cut key policy rates for the first time in nine months.
The repurchase rate, the interest charged by RBI on short-term borrowings by commercial banks, has been cut by 25 basis points to 7.75 percent. This has the potential to lower the cost of borrowings for banks.
Also, the cash reserve ratio, or the money against deposits which commercial banks have to retain in liquid assets, has been lowered from 4.25 percent to 4 percent.
Sharma, who is here to attend Partnership Summit, said the RBI move was balanced and it would help revive growth.
The central bank's move will make home, auto and other loans cheaper and reduce the cost of borrowings. This is expected to help revive the sluggish economic growth, which fell to nearly a decade low of 5.4 percent in the first half of the current financial year.