The RBI said it was maintaining its "accommodative" stance, and would keep its position "as long as necessary" to revive growth, while ensuring inflation remained within target
The move comes after the global central banks have been cutting rates to help shore up the economy amid coronavirus pandemic
The repo rate has come down by 75 basis points to 4.4 per cent, while the reverse repo rate has been lowered by 90 basis points to 4 per cent now
The Monetary Policy Committee (MPC) has decided to reduce the reverse repo rate by 90 basis points (bps) to 4 per cent, and cash reserve ratio by 100 bps to 3 per cent
The RBI allotted an amount of Rs 25,012 crore, with a pro-rata allotment percentage to 92.27 per cent
The finance ministry has been nudging public sector banks to pass the whole repo rate cuts to retail loans for pushing consumption
The Sensex fell nearly 2,000 points, as foreign investors liquidated their investments for safe haven assets such as US bonds. As prices of bonds rise, yields fall.
Analysts expect an impact on India due to raw material shortages likely to disrupt supplies for key industries
The MPC is mandated to keep inflation in a range of between 2% and 6% and recent data showed the retail inflation rate in January climbing to a more than six-year high of 7.59%
The monetary authority also clarified that the interest on these repos will be compounded on an annual basis and will be conducted at the prevailing repo rate
While home finance can go for a longer period, and vehicle finance loans can reach seven years, analysts say five years is a good enough window for banks
Experts say funds exposed to lower maturity debt papers to gain from long-term repo operations
The RBI raised its inflation projection for the six months to Sept to 5-5.4% from 3.8-4% previously, while terming the outlook on price rise as "highly uncertain"
Despite expectations of a moderation in inflation from the elevated level of 7.35% in Dec 2019, the RBI's MPC expects a hardening of prices of other food items, notably those of pulses and proteins
From RBI MPC's decision to keep the repo rate unchanged to the latest on coronavirus, here are the day's top headlines
The MPC's action has not surprised as CPI inflation for December left little room for a rate cut
The committee voted 6-0 in favour of the status quo on the interest rates.
Following the November print of 5.54%, RBI had sprung a surprise and opted to hold the repo rate at 5.15 per cent. It, however, continued with the accommodative stance as long as it was necessary.
The Indian economy is expected to expand by 7.5 per cent in nominal terms and lower nominal growth can make debt servicing difficult for the government and private borrowers
The market and economists were expecting a sure cut in the policy review, considering the weak growth rate