The Reserve Bank today reduced its key short-term lending rate (repo) by 100 basis points with immediate effect, a move that will help lower interest rates and spur consumption to keep the economy ticking.
The repurchase rate will stand reduced at 8 per cent now.
"In order to alleviate the pressure and, in particular, to maintain financial stability, the RBI has decided to reduce the repo rate under the liquidity adjustment facility by 100 basis points to 8 per cent with immediate effect", it said in a statement.
RBI had earlier in the month slashed the Cash Reserve Ratio (CRR) by 250 basis points unlocking Rs 100,000 crore into the financial system.
Finance Minister P Chidambaram told reporters in New Delhi that the move would be "beneficial" to borrowers and investors, boost confidence in the economy. He described the RBI decision as part of a series of measures to moderate inflation and ensure economic growth.
"This is our hope, (it) will enthuse investors to continue to take forward their investment proposals," he said.