RBI cuts repo rate by 35 basis points in third bi-monthly monetary policy

The move is expected to lead to reduction of lending rate by banks leading to lower EMI for housing, car loan and corporate borrowers. This is RBI’s second monetary policy after Modi 2.0 took charge in May.

The repo rate under the liquidity adjustment facility (LAF) has been reduced by 0.35 basis points to 5.40 percent from 5.75 percent with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 5.15 percent, the marginal standing facility (MSF) rate and the Bank Rate to 5.65 percent and the CRR rates remain at 4 percent, RBI said.

The MPC has also lowered its GDP growth forecast to 6.9 percent for the current fiscal from 7 percent earlier.

RBI said, all members of the MPC unanimously voted to reduce the policy repo rate and to maintain the accommodative stance of monetary policy. Four  members — Ravindra  H Dholakia,  Michael  Debabrata  Patra,  Bibhu  Prasad  Kanungo and RBI Governor Shaktikanta Das voted to reduce the policy repo rate by 35 basis points, while two members Chetan Ghate and Pami Dua voted to reduce the policy repo rate by 25 basis points.

“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” an RBI statement said.

The RBI under its new Governor Shaktikanta Das has cut its key rates by a cumulative 0.85 percent since he took charge. The central bank has slashed the short-term lending rate (repo rate) by 25 basis points (0.25 percentage points) each in its last three policy reviews.

The next meeting of the MPC is scheduled during October 1, 3 and 4, 2019.