The Reserve Bank of India (RBI) cut its key repo rate by a larger-than-expected 50 basis points on Friday and slashed the reserve ratio for banks as low inflation gave policymakers room to focus on supporting growth amid a volatile global economy.

India's central bank has lowered interest rates by a deeper-than-expected half a percent - the third cut in a row amid falling inflation and lower growth in Asia's third largest economy. It also increased the amount of liquidity - or supply of money - available in the system.

Indian stocks rallied on Friday after the central bank delivered a bigger-than-expected interest rate cut, as it front-loaded policy easing to support domestic growth in the "fragile and highly fluid" global backdrop.