The central bank of India is set to discuss third reduction in interest rates during past five months, as the country’s inflation rate seems stable enough.

The Reserve Bank of India (RBI) has already lowered its benchmark repo rate, the level at which it lends to commercial banks, by 50 basis points to 7.5 percent this year, AFP reported.

Analysts believe the RBI is sure to cut rates again during its next meeting on Tuesday to encourage greater lending to businesses and increase consumer spending in a bid to further stimulate the South Asian country’s economy.

"I expect the RBI to cut the rate by 25 basis points," Ashutosh Datar, an economist at IIFL Institutional Equities, told AFP.

Meanwhile, Rupa Rege Nitsure, chief economist at L&T Financial Services, said she believes the Mumbai-based bank will go for a "modest" cut.

She added, "Given the uncertainty concerning oil prices and the depreciation in the rupee, which have a high inflationary potential, I don't think many people are expecting a 50-point cut."

The RBI, led by Raghuram Rajan, slashed the repo rate by 25 basis points in January -- the first reduction in 20 months -- before it took everybody by surprise following a second cut in March. The bank kept the rate unchanged last month, citing inflation concerns and a failure of most commercial banks to pass on lower borrowing costs to customers in Asia's third-largest economy.

Nitsure, however, said that 20 banks are currently observing Rajan's call to reduce their base rate and implement another cut to motivate others to "follow suit."

Prime Minister Narendra Modi's government swept to power last year pledging to reform and revive a flagging economy.

On Friday, data showed that India's economy grew 7.5 percent in the first three months of the year, overtaking China.

The government is willing for the RBI to cut rates even more, but Rajan’s priority is to control inflation, with his main target being to bring it consistently below six percent by January next year.

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