The Reserve Bank of India (RBI) today issued a notification to reduce the bank rate or the interest the banks and financial institutions pay to the central bank on borrowed funds to 9% from 9.5% now.
"The RBI has decided to lower the bank rate to 9% per annum from 9.5% per annum with effect from April 17, 2012," the central bank said in a statement.
The notification follows the announcement made by RBI Governor D Subbarao in the annual credit policy which was unveiled yesterday.
In line with 0.5% cut in short-term lending (repo) rate, the RBI also reduced the bank rate to 9%.
The RBI decided to reduce the benchmark repo rate to 8% from 8.5%, after a gap of three years, to promote growth which during 2011-12, which slipped to a three year low of 6.9%.
The central bank has pegged the GDP growth rate for the current fiscal at 7.3%.