RBI cuts Repo Rate

Subbarao lowered the repo rate — the rate at which the central bank lends to banks — 25 basis points to 7.25% as expected. Bank rate and reverse repo —the rate RBI pays banks for keeping excess funds with it — will fall proportionately. Cash reserve requirement — the proportion of bank deposits to be kept with RBI — was unchanged at 4%, disappointing bankers.
Price pressures will resurface as and when the government raises the prices of coal, power and even diesel to market levels, which makes it difficult to conclude that inflation has settled at a lower level permanently, said Subbarao.