India's central bank cuts key lending rate to 6.5 percent

India's central bank on Tuesday cut its key interest rate by a quarter of a percentage point and hinted at other measures to boost liquidity and spur economic growth.

The Reserve Bank of India reduced its repo rate to 6.5 percent. This is the rate at which the central bank lends to commercial banks.

The cut takes interest rates to their lowest level in five years and aims to boost the economy by lowering the cost of borrowing. It also comes as inflation has eased.


"Retail inflation measured by the consumer price index dropped sharply in February after rising for six consecutive months," the bank said in a statement marking the first monetary policy announcement of the current fiscal year.

RBI governor Raghuram Rajan kept India's growth forecast for the 2016-17 financial year unchanged at 7.6 percent. India's financial year runs from April to March.

Rajan said the central bank's policy would remain "accommodative," hinting at another rate cut in the future.

(AP)

Reserve Bank of India (RBI) Governor Raghuram Rajan addresses a press conference on the first monetary policy announcement of the current fiscal year in Mumbai, India, Tuesday, April 5, 2016. The RBI on Tuesday cut its key interest rate by a quarter of a percentage point and hinted at other measures to boost liquidity and spur economic growth.                

An Indian policeman stands guard with a sniffer dog at the entrance of the Reserve Bank of India (RBI) headquarters in Mumbai, India. The RBI on Tuesday cut its key interest rate by a quarter of a percentage point and hinted at other measures to boost liquidity and spur economic growth.