In an effort to increase liquidity and boost a slowing economy, the Reserve Bank of India (RBI) Saturday cut two key short term lending rates by 1 per cent, reported dpa.
The central bank reduced the interbank lending rate by 100 basis points to 6.5 per cent.
The reverse repo rate, at which the RBI borrows money from the banks, was also reduced by 100 basis points to 5 per cent.
Both rates would be effective from Monday, bank governor D Subbarao said.
He also announced a special refinancing package of 70 billion rupees (about 1.4 billion dollars) for the small enterprise sector.
Subbarao said a similar refinance facility was being worked out for the housing sector and would be announced later in this month.