The Reserve Bank of India  RBI) on Thursday cut benchmark interest rate by 0.25 per cent for the second time in a row to bring interest rate to the lowest level in one year on softening inflation.

According to the report, RBI on Thursday cut its key interest rate by 25 basis points or 0.25 per cent to 6 per cent, in a widely expected move to propel the economy. Announcing a back-to-back cut in the repo rate just a week before the national election, the RBI's monetary policy committee also maintained its neutral stance on the trajectory of interest rates going ahead. A neutral stance enables the central bank to move either way on the key rates.

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Repo rate is the main interest rate at which the Reserve bank  lends short-term funds to commercial banks. Four out of the six members of the Monetary Policy Committee voted in favour of a 25 basis points cut in repo rate, while the other two voted to keep the rate unchanged.  Over 85 per cent of the nearly 70 economists polled by news agency Reuters had expected the central bank to cut the benchmark lending rate by 25 basis points to 6.00 per cent today.

The central bank projected GDP growth at 7.2 per cent for financial year 2019-20, according to its first policy statement of financial year 2019-20.

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RBI  said it expects economic growth to be in the range of 6.8-7.1 per cent in the first half of the current financial year, and in th. e range of 7.3-7.4 per cent in the second half with risks evenly balanced. Inflation is likely to remain benign in the short term, it noted. Assuming a normal monsoon in 2019, the RBI lowered its CPI inflation projection to 2.4 per cent in the fourth quarter of 2018-19.

For the first half of the current financial year the central bank expects inflation at 2.9-3.0 per cent, and 3.5-3.8 per cent in the second half.

Due to rate cuts, commercial banks will have more room to pass on the benefit of lower lending rates to loan borrowers and it would also translate into a lower interest rate earned by depositors.