The Hindu : Repo rate cut

Online edition of India's National Newspaper
Sunday, Aug 24, 2003

Business

Business

Repo rate cut

By Our Special Correspondent

MUMBAI AUG. 23. Indicating a strong low interest rate bias, the Reserve Bank of India today cut the repo rate by 50 basis points to 4.5 per cent from 5 per cent. With this move of the RBI, banks are likely to cut their deposit rates next week.

The Asset Liability Committees of several banks, including Bank of Baroda, Bank of India, HDFC Bank and ICICI Bank will be meeting next week to review their deposit rates. According to industry watchers, 25 to 50 points cut in deposit rates are likely.

Repo rate is the rate at which liquidity adjustment facility is operated by the RBI. Banks keep their excess funds in repo operated by the RBI.

In view of the current macroeconomic and overall monetary conditions, the Reserve Bank of India has decided to reduce the one day and 14 day repo rate under the Liquidity Adjustment Facility (LAF) of the Reserve Bank to be made available on August 25 to 4.5 per cent from 5 per cent.

"The decision to reduce the repo rate has been taken in the light of decline in the inflation rate and good monsoon,'' the official spokesperson of RBI said.

The Reserve Bank had earlier pointed out that it was closely watching the movement in inflation and behaviour of the monsoon before any decision would be taken.

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