The Reserve Bank of India today announced a cut of 25 basis points in its key interest rates, directly raising prospects for banks to lower down lending rates as well as offer car and housing loans at reduced interest rate.

Since introduction of the national budget 2015 last week, an economic recovery has been recorded which to be consolidated further the repurchase (repo) rate has been drop down to 7.5 per cent from 7.75 per cent, while the reverse repo rate has been adjusted to 6.5 per cent from 6.75 per cent.

Interestingly, this move is majorly aimed at bringing the inflation level below 6 per cent by January 2016, and more or less 4 per cent by the end of fiscal year 2016-2017.

"To summarise, softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 percent in the second half," Reserve Bank of Governor Raghuram G. Rajan said in a statement.

While the next bi-monthly policy statement will be issued on April 7, 2015 the weak state of some sectors and the global trends, prompted the central bank, in its own admission, to become more optimistic to make changes immediate in its stand.