Subdued inflation and demand prompted India's central bank, RBI, on Wednesday to reduce its key lending rate by 25 basis points (bps).

Subdued inflation and demand prompted India's central bank, RBI, on Wednesday to reduce its key lending rate by 25 basis points (bps).

The policy repo rate under the liquidity adjustment facility (LAF) is cut by 25 basis points to 7.5 per cent from 7.75 per cent. The reduction will come into effect immediately.

The RBI has, however, kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4 per cent of net demand and time liabilities (NDTL).

 It has said that it will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under seven-day and 14-day term repos of up to 0.75 per cent.

It has also decided to continue with daily variable rate repos and reverse repos to smooth liquidity. Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent, and the marginal standing facility (MSF) rate and the bank rate to 8.5 per cent.