Rajan to ensure loan rates fall, cautions 'turbulent waters' ahead

The Reserve Bank of India (RBI) will work with the government to ensure that the benefits of a cut in the policy interest rate is passed on by commercial banks through reductions in their lending rates, RBI Governor Raghuram Rajan said on Tuesday.

On Tuesday, the central bank cut its policy interest rate to a 4-1/2 year low of 6.75 , in a bigger-than-expected move that, with inflation running at record lows, could help an economy in danger of slowing down.

Rajan also said the RBI is comfortable with inflation levels with food prices continuing to fall.

A substantial fall in global commodity prices allowed India's central bank to front-load interest rate reductions with a better-than-expected 50 basis point cut on Tuesday, Reserve Bank of India Governor Raghram Rajan said on Tuesday.

The RBI cut its policy interest rate to a 4-1/2 year low of 6.75 per cent, in a move that, with inflation running at record lows, could help an economy in danger of slowing down.

Rajan however cautioned that India would have to steer through "tubulent waters" for a while longer, and added the central bank was focused on making India more robust to support strong growth.