RBI Cuts Repo Rate by 50 bps; Loans to Get Cheaper

The Reserve Bank of India (RBI) cut interest rates on Tuesday, April 17, 2012 for the first time in three years by an unexpectedly sharp 50 basis points to give a boost to flagging economic growth but warned that there is limited scope for further rate cuts.

The RBI cut the repo rate by 50 bps to 8%. It left the CRR unchanged at 4.75%. Loans are likely to get cheaper now.

It also warned that India's current account deficit, which widened to 4.3 percent of GDP in the December quarter, is "unsustainable" and will be difficult to finance given projections of lower capital flows to emerging markets in 2012.