RBI cuts repo, reverse repo rates by 100 basis points, fiscal stimulus seen

"We believe that the liquidity is very comfortable now, and I want to ensure the financial sector community that Reserve Bank will endeavor to maintain comfortable liquidity conditions using all the instruments available to us," he said.

The central bank, Subbarao said, would try to maintain "a comfortable liquidity position, see that the weighted average overnight money market is maintained with the repo-reverse repo corridor and ensure conditions conducive for flow of credit to productive sectors, particularly the stressed export and small and medium industry sectors."

Along with the rate cuts, the central bank took steps, Saturday, to provide refinance facility of up to Rs.7000 crore to the Small Industries Development Bank of India (SIDBI) to promote funding for small industries and, in order to increase flow of funds to the ailing real estate sector, it gave the National Housing Bank (NHB) Rs.4000 crore refinance facility and encouraged the banks to lend to the housing sector by according "priority sector" status to housing loans up to Rs.20 lakh.

The apex bank also put a cap on the cost of some export credit to boost the export industry and allowed select banks to buyback foreign currency convertible bonds (FCCBs) from customers to "take advantage of current discounted rate at which these bonds are trading."

"The cumulative impact of the measures in today's package, together with earlier measures, should be to step up demand and arrest the growth moderation," Subbarao said, adding that the central bank would take more swift action if needed.

The fundamentals of the Indian economy continue to be strong, the apex bank said. "Once the crisis is behind us, and calm and confidence are restored in the global markets, economic activity in India will recover sharply. But a period of painful adjustment is inevitable," it added.