BOMBAY. Mar 2: India's central bank yesterday eased monetary policy, cutting key rates and reducing the amount of cash that commercial banks must hold in reserve in a bid to boost money available for lending, reports AFP.

The move to trim the bank rate, repo rate and cash reserve ratio was in line with New Delhi's resolve to slash interest rates.

The central Reserve Bank of India (RBI), in a statement here, said the bank rate was being cut by one percentage point to eight per cent from Monday.

The cash reserve ratio was being slashed half a percentage point to 10.5 per cent from

March 13, while the repo rate was cut by two percentage points to six per cent from Wednesday.

The bank rate is the rate at which the central bank lends to commercial banks, while the> cash reserve ratio is the money that banks must keep in reserve with the central bank.

The repo rate governs debt involving a financial institution selling government securities to the central bank.

Finance Minister Yashwant Sinha had said he favoured a fall in interest rates after announcing the budget for the year to March 2000 on Saturday.

On Monday, RBI Governor Bimal Jalan said the time was

ripe.

"In view of lower inflation in recent weeks, slow credit offtake and next year's lower borrowing programme announced by the government in the budget. the RBI's judgement now is that conditions are right for such a move," he said.

Financial analyst Pradip Shah welcomed the cuts. "All the cuts are good. The government is signalling a fall in interest rates and availability of more money in the system.

'The cut in cash reserve ratio is expected to release funds worth the equivalent of about 850 million dollars into the banking system. The issue now is whether the commercial

banks will cut lending rates for borrowers.

"Availability of money was never a problem with the banking sector, the high interest rates were." he said.

Analysts said the cuts were an attempt by New Delhi to hasten recovery.

The Confederation of Indian Industry (CII). India's premier trade body, said the central bank move was "unprecedented."

"With 48 hours of the presentation of the budget, the announcement of slashing bank rates is truly unprecedented and historic." the CII said in a statement.