Reserve Bank of India (RBI) lowered its key short-term lending rate (repo) to commercial banks on Monday, a move that will spur consumption and help growth amid the global economic slowdown.

"In order to alleviate the pressure and in particular to maintain financial stability, the RBI has decided to reduce the repo rate under the liquidity adjustment facility by 100 basis points to 8 per cent with immediate effect," the bank said in a statement.

The RBI, which observed that the global financial situation continued to be "uncertain and unsettled," has pumped nearly 18 billion dollars into the banking system through cuts in the Cash Reserve Ratio earlier this month.

Indian Finance Minister P Chidambaram told reporters in New Delhi that the move would be "beneficial" to borrowers and investors, and boost confidence in the economy.

He described the RBI decision as part of a series of measures to moderate inflation and ensure economic growth.

"This is our hope, (that it) will enthuse investors to continue to take forward their investment proposals," he was quoted as saying by the PTI news agency.