PTI

Mumbai, Apr 21: In a move that could bring further relief to the home, auto and corporate borrowers, the Reserve Bank of India on Tuesday cut short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points.

In its annual credit policy for 2009-10, the RBI reduced the repo rate (rate at which the Reserve Bank of India infuses cash into the banking system) to 4.75%, and the reverse repo rate (rate at which it absorbs excess cash from banks) to 3.25%, effective immediately, while retaining other key rates like the cash reserve ratio, the percentage of deposits that banks keep with the central bank.

In view of the ongoing global economic slowdown, the central bank has pegged the economic growth rate forecast for the current fiscal to 6 percent, against 6.5-6.7 percent estimated for 2008-09.

"Any upturn in growth momentum is unlikely in view of the projected contraction in global demand during 2009, particularly decline in trade," RBI Governor D Subbarao said in the policy, adding private investment demand was expected to remain subdued.

"The policy instance of the RBI indicates further softening of interest rates," Oriental Bank of Commerce (OBC) Executive Director S C Sinha told PTI.

The good news, however, is on inflation, which is projected to remain at around 3 percent in the medium term and 4 percent by the end of March 2010.