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Tuesday, Mar 05, 2002

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RBI cuts repo rate to 6 per cent

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MUMBAI, March 4

THE Reserve Bank of India on Monday effectively reduced the repo rate by 50 basis points, signalling a further lowering of interest rates.

The RBI has announced a one-day fixed rate repos in Government securities on March 5, at 6 per cent per annum. The repo rate offered by RBI under the LAF scheme has been 6.5 per cent so far. Market has been expecting a cut in repo rates since the 50 basis points reduction in the small savings rate in the Union Budget 2002-03.

Bankers said that with this cut, RBI has indicated that banks will have to lower their lending and deposit rates. The Bank rate may also be reduced corresponding to this cut in the repo rate, said one bank official. Bank rate is currently at 6.5 per cent.

"Short of telling the banks to lower the rates, the RBI has given a clear signal. Banks may have little option now," said one banker.

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