Mumbai, March 4 (KNN)   By cutting the repo rate by 25 basis points, Reserve Bank of India (RBI) has cast the vote of confidence in favour of Finance Minister that budget proposals are growth oriented and non-inflationary.  

Announcing the cut, RBI Governor Raghuram Rajan has said  "the picture of a steadily recovering economy appears right.. consequently, it has been decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect”.

A repo rate is the rate at which the Reserve Bank lends to banks; a lower  repo rate may lead to lowering of interest rates. Lowering of the rate also reflects confidence of the central bank that inflation is within its control.

It augurs well for industry especially Micro, Small and Medium Enterprises (MSMEs) as the move is likely to ease liquidity and may also lower interest rates.   

“With the second such rate cut by RBI outside regular policy review in less than two months, banks should lower interest rates for MSMEs”,   said Dr. Gandhikumar, President of Federation of Indian Micro and Small & Medium Enterprises (FISME).  (KNN/AB)