RBI cuts repo rate by 25 bps

he Reserve Bank of India's Monetary Policy Committee (MPC) has slashed key repo rate for the fifth time in the year as it aims to boost demand and private consumption amid an economic slowdown.

While the RBI committee had slashed repo rate by 35 bps in the August policy meeting, it has reduced the key lending rate by an additional 25 bps after its latest bi-monthly review meeting.

The repo rate or the rate at which RBI lends to banks has been revised to 5.15 per cent from 5.40 per cent. Likewise, the reverse repo rate has been adjusted to 4.90 per cent.

All the members of RBI's MPC voted unanimously to reduce repo rate and maintain an accommodative stance with regards to monetary policy.

All members of the MPC voted to reduce the policy repo rate and to continue with the accommodative stance of monetary policy. One MPC committee member, Ravindra H. Dholakia, had voted to reduce the repo rate by 40 basis points.

The 25 bps rate cut is in line with the predictions of economists, who said that that RBI is likely to reduce the key lending rate to aid the government in its mission to boost economic growth.

RBI governor Shaktikanta Das had given a strong indication earlier that the central bank would be inclined towards cutting rates further as inflation continues to remain under its medium-term target of four per cent.

The central bank's move is expected to further bring down interest on home loans, especially after it mandated all banks to follow its external benchmark from October 1.

However, the central bank has reduced the GDP growth outlook for 2019-20 to 6.1 per cent from 6.9 per cent in the previous bi-monthly MPC meeting. This, too, was expected in the backdrop of a slowdown across multiple sectors.

The GDP outlook for the year 2020-21 has been revised to 7.2 per cent.

Source : India Today