Reserve Bank of India slashed its two key short-term interest rates by 100 basis points each on Friday to stimulate an economy that has been slowing faster than expected.
It cut the repo rate, at which it lends cash to banks, to 5.5 per cent from 6.5 per cent.
The reverse repo rate, the rate at which the central bank absorbs excess cash from the system, was cut to to 4.0 percent from 5.0 percent.
Both reductions are effective immediately.
The repo rate has been cut aggressively since mid-October last year as the central bank tried to minimise the knock-on effects of the global financial crisis.
The central bank also announced a cut in cash reserve ratio, the proportion of deposits banks must keep with the central bank, by 50 basis points to 5.0 percent with effect from Jan. 17.
(Reporting by V. Ramakrishnan; Editing by Ranjit Gangadharan)