Raghuram G. Rajan, Governor, Reserve Bank of India (RBI) while announcing reduction in key interest rates in the second bi-monthly monetary policy review said the banks should pass through the sequence of rate cuts into lending rates.

As per expectations, repo and reverse repo rate reduced by 25 basis points. Now, revised repo and reverse repo rate stood at 7.25% and 6.25% respectively compared with 7.50% and 6.50% earlier. On the other hand, the central bank has kept cash reserve ratio (CRR) and statutory liquidity ratio (SLR) unchanged at 4% and 21.5% respectively.

Previously, the central bank has slashed interest rates by 25 basis points on two occasions taking total reductions in lending rates to 75 basis points in 2015.

The Governor said, 'Banks have started passing through some of the past rate cuts into their lending rates.' The banks have announced 20 to 25 basis points reduction in lending rates after the RBI announced 50 basis points rate cut earlier on two occasions.