RBI cuts repo rate by 0.25 pc to 6%

RBI cuts repo rate by 0.25 pc to 6%Edited By Odishatv Bureau | By PTI On Apr 4 2019- 12:15:56 Pic Credit India Today

The Reserve Bank of India (RBI) is expected to announce a reduction of 25 basis points (0.25 per cent) in the key interest rate to 6 per cent today.

The RBI's six-member rate setting panel headed by RBI governor Shaktikanta Das on Tuesday started its 3-day monetary policy meet amid expectations of a cut rate to boost economic activities.

"Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the bank rate to 6.25 per cent".

RBI monetary policy LATEST updates: Reserve Bank Governor Shaktikanta Das Thursday said the central bank will soon come out with revised circular for effective resolution of stressed assets in the backdrop of the Supreme Court order. However, RBI has kept the rates unchanged in the last two monetary policy announcements held in October and December 2018 this fiscal.

India's financial markets were little changed after the policy decision. The statement also notes that despite the favourable movement in Gross Fixed Capital Formation figures, private investment continues to be sluggish.

It expects CPI inflation at 2.4 per cent in January to March and 3.5 per cent to 3.8 per cent in the second half of the fiscal.

Director General of CII Chandrajit Banerjee said, "In view of the visible signs of a growth slowdown in the second half of 2018-19, it is requested that the RBI should reduce the repo rate by at least 25 basis points in the upcoming policy and maintain a softening trend in monetary policy".

GDP growth for 2019-20 in the February policy was projected at 7.4 per cent in the range of 7.2-7.4 per cent in H1, and 7.5 per cent in Q3 - with risks evenly balanced.

Annual consumer inflation was just 2.57% in February following five months of deflation in food prices.

The benchmark interest rate was cut by 0.25 per cent to 6 per cent, a move that will result in lower cost of borrowing for the banks that are expected to transmit the same to individuals and corporates.

Repo rate is the interest charged by RBI from commercial banks while lending them short term money, and reverse repo is the rate at which RBI borrows money from the commercial banks.

Abheek Barua, chief economist, HDFC Bank said the current RBI projections on growth and inflation suggest that there is room for further easing but it is unlikely to happen in the next policy review in June.

"The moderation of growth in the global economy might impact India's exports", the central bank said.

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