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Reserve Bank of India's newly appointed Governor Urjit Patel cut the key interest rates unexpectedly on Tuesday.
At the first monetary policy committee meeting of RBI, policymakers unanimously decided to reduce the benchmark lending rate, the repo, to 6.25 percent from 6.50 percent. Consequently, the reverse repo rate was adjusted to 5.75 percent.
The repo rate was previously lowered by a quarter-basis point in April. The bank has cut the rates by a cumulative 175 basis points since 2015.
The bank said the decision taken by the MPC is consistent with an accommodative monetary policy stance in consonance with the objective of achieving consumer price index inflation at 5 percent by the fourth quarter of 2016-17.
The momentum of growth is expected to quicken with a normal monsoon raising agricultural growth and rural demand, the bank said. The RBI maintained its growth outlook at 7.6 percent for 2016-17.
The MPC envisaged a trajectory taking headline CPI inflation towards a central tendency of 5 percent by March 2017, with risks tilted to the upside.
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