RBI expects inflation at around 5%
The Reserve Bank of India cut its policy interest rate by a quarter percentage point on Tuesday, reducing it to a more than five-year low while dangling the prospect of another cut later this year if inflation trends stay benign.
The RBI cut the repo rate by 25 basis points to 6.50 percent - the lowest since January 2011, in a move widely anticipated by analysts polled by Reuters.
Controlling inflation is the central bank's priority, but Prime Minister Narendra Modi's government would welcome any move to improve business conditions for industrialists who, despite data depicting India as one of the world's fastest growing economies, remain hesitant to invest.
Following are the highlights of RBI's first bi-monthly monetary policy statement, 2016-17:
* Repo rate cut by 0.25% to 6.50%
* Reverse repo hiked by 0.25% to 6%
* Cash reserve ratio or CRR unchanged at 4%
* Minimum daily cash maintenance by banks with RBI cut by 5%
* MSF rate cut by 0.75% to lower banks' borrowing cost
* Policy to remain accommodative going forward
* Pegs 2016-17 growth forecast at 7.6%
* Expects inflation at around 5%
* Cut in small savings rate, MCLR introduction to improve monetary policy transmission
* Government adhering to fiscal consolidation path will help lower inflation
* 7th Pay Commission award to put upward pressure of up to 1.5% on inflation
* Proposes custodian banks; banks focusing on wholesale and long term financing
* Second bi-monthly monetary policy on June 7.
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