The Reserve Bank of India (RBI) announced on Tuesday reduction in key interest rates in the fourth bi-monthly monetary policy review. Repo and reverse repo rate reduced by 50 basis points, which is higher than expected 25 basis points cut.

Now revised repo and reverse repo rate stood at 6.75% and 5.75% respectively compared with 7.25% and 6.25% 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.

Commenting on the rate cut, V S Parthasarathy - Group CFO, Mahindra & Mahindra
said, ''Rajan surprised the market with a deeper than expected rate cut. This cut comes as a balm for anxious markets and I see the relieved celebration in the equity and fixed income markets."

The Mahindra & Mahindra CFO further said, "This pre- Dusshera or Diwali gift will lift the festive demand as banks will hopefully start reducing the cost of consumer loans. The industry’s expectation of a turnaround in demand led growth in the second half will now be well anchored."
 
"The cut, the prognosis of lower inflation and therefore this indication of an accommodative stance, all provide for enabling & softening the financial market conditions. This provides relief from the uncertainty surrounding the US Fed rate lift-off and its impact on Indian markets. The phasing of lower SLRs, and the increase in FPI limits to sizable levels over the next 2-3 years are measures which are important ''invest in India'' policies,'' he added.

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