Mumbai, Jun 2 (IANS): Giving in to overwhelming demands for an easing of the monetary policy, the Reserve Bank of India (RBI) on Monday lowered its short-term lending rate by 25 basis points in a move that could potentially reduce the cost of borrowings on personal and corporate loans.

In his bi-monthly monetary policy review for the current fiscal year at the RBI headquarters here on Mint Street, Governor Raghuram Rajan on the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to reduce the repurchase rate to 7.25 percent.

Prior to the review, the repo rate at which the central bank lends short-term funds to commercial banks stood at 7.5 percent.

"Consequently the reverse repo rate under the liquidity adjustment facility (LAF) stands adjusted to 6.25 percent and marginal standing facility (MSF) rate and the bank rate to 8.25 percent," the governor said in a statement.

The cash reserve ratio (CRR), the quantum of funds commercial banks have to keep in the form of cash or government bonds, has been left unchanged at 4 percent of deposits.