RBI slashes reverse repo rates for the second time in three weeks, wants banks to lend more

New Delhi : In a surprise move, the Reserve Bank of India on Friday slashed its key deposit rate for the second time in three weeks, a move that will discourage banks from keeping the funds idle and push them towards lending more money to boost the economy.

The RBI cut its reverse repo rate by 25 basis points (bps) to 3.75 per cent with immediate effect, Governor Shaktikanta Das said in a video conference. The rate had already been cut by 90 bps last month.

The central bank kept its benchmark repo rate unchanged at 4.40 per cent after a 75-bps cut last month.

Shaktikanta Das claimed that the economy has deteriorated significantly in some areas since his last address.

"The surplus liquidity in the banking system has risen significantly in the wake of government spending and the various liquidity enhancing measures undertaken by the RBI," Mr Das said.

"In order to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy, it has been decided to reduce the fixed rate reverse repo rate," he added.

Meanwhile, PM Narendra Modi has announced an extension in the lockdown till May 3, to contain the spread of coronavirus in India.