NEW DELHI, June 2: India's central bank cut a key interest rate by a quarter percentage point Tuesday, the third such reduction this year in support of government efforts to boost growth.
The latest rate cut lowers the policy repo rate, at which commercial banks can borrow from the Reserve Bank of India, to 7.25 percent. The Reserve Bank of India cut interest rates by a quarter percentage point in January and March.
Revised interest rate corridor system introduced
The cut comes after the Indian economy registered 7.5 percent growth in the January to March quarter compared with a year earlier. That made India the world's fastest growing major economy, overtaking China's 7 percent growth in the same quarter.
The central bank, however, left all other policy instruments such as the cash reserve requirement unchanged at 4 percent and Statutory Liquidity Ratio at 21.5 percent.
"With low domestic capacity utilization, mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate," Reserve Bank of India Governor Raghuram Rajan said.
India's stubbornly high inflation has moderated in recent months to just under 5 percent, giving the central bank more leeway to lower borrowing costs.
Leaders of Indian industry were pressing for a cut in interest rates. They said high credit costs were a dampener for business and investment.
