Tags: Maharashtra , Mumbai , RBI

Mumbai: The Reserve Bank today cut its key overnight lending and borrowing rates by 50 basis points each with immediate effect, signalling banks to further soften interest rates.

Since October, RBI has reduced key policy rates to fuel demand in the economy reeling under the impact of the global financial meltdown.

The repo, the rate at which RBI lends short-term funds to commercial banks, has been reduced from 9 per cent in October to 5 per cent now. Similarly, the reverse repo, the rate at which banks park overnight funds with RBI, has been brought down from 6 per cent to 3.5 per cent.

The decision, RBI said, "will further encourage banks to provide credit for productive purposes at viable interest rates. The Reserve Bank on its part would continue to maintain ample liquidity in the system."

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