Shedding its 9-month long hawkish monetary policy stance, the Reserve Bank of India
(RBI) slashed its key interest rates by 0.25 per cent and released Rs 18,000 crore
additional liquidity into the system to perk up growth through reduced cost of borrowing.
RBI Governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate (repo rate) by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent.
"The moderation in inflation conditions provides the opportunity for monetary policy to act in conjunction with fiscal and other measures to stem growth risks," Subbarao said.
He praised government's recent reform measures including liberalisation of foreign direct investment (FDI) in retail, deferment of GAAR and progressive deregulation of fuel prices saying these actions would "help engender stable macroeconomic conditions and return the economy to its high growth trajectory."
Stock market celebrated the rate cut with a 91 point rally in early trade to take the benchmark Sensex to 20,194.06
With inputs from PTI
The CRR cut will infuse Rs 18,000 crore additional liquidity in the system 
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