RBI cuts repo rate by 0.25% to spur growth
MUMBAI: The Reserve Bank on Friday cut its benchmark
lending rate by 0.25 per cent to revive growth that has hit a six-year low of 5 per cent, and affirmed commitment to remain accommodative to address growth concerns ‘as
long as necessary’. With this cut, the repo rate, at which it lends to the system, will now come down to 5.15 per cent and push consumption during the ongoing festival season.
This will help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.
This is the fifth straight cut in rates by the Reserve Bank of India in as much policy reviews in 2019 and takes
the total quantum of reductions to 1.35 per cent.
In the fourth bi-monthly review of the policy, the RBI sharply reduced its GDP growth estimate to 6.1 per
cent for FY20 as against 6.9 per cent it was expecting earlier.
This cut came in the wake of June quarter growth slipping to a six-year low of 5 per cent, which is attributed to a slowdown in consumption, lack of new investments by the industry and also a slump in the global economy.
“...the MPC (monetary policy committee) decided to continue with an accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target,” the resolution of the sixmember panel headed by RBI Governor Shaktikanta Das said.
All the six members voted for a rate cut at the end of the three-day meeting, with Ravindra Dholakia voting for a 0.40 per cent reduction in rates.
On inflation, which is the key mandate of the RBI with the target of 4 per cent in the medium term, the MPC moved up the September quarter expectations “slightly upwards” to 3.6 per cent, but retained its projection for the second half of this fiscal at 3.5-3.7 per cent.