RBI Cuts Repo Rate By 25 Basis Points

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RBI Cuts Repo Rate By 25 Basis Points
Rajat Mishra - 04 October 2019

New Delhi, October 4: The six-member Monetary Policy Committee of the Reserve Bank of India on Friday slashed the short term lending rate, repo rate by 25 basis points in its fourth bimonthly policy review. Also RBI kept its accommodative stance unchanged and said: "It is necessary to revive growth, while ensuring that inflation remains within the target."

'Repo rate has been cut by 25 basis points, from 5.40% to 5.15%. The reverse repo rate has been adjusted to 4.90% and bank rate at 5.40 %, accordingly'' the apex bank said.

The committee also said that it would maintain an “accommodative stance” as long as it is necessary to revive growth while ensuring that inflation remains within the target”. This leaves room for more rate cuts in future.

All members of the MPC voted in favour of reducing the repo rate. Chetan Ghate, Pami Dua, Michael Debabrata Patra, Shri Bibhu Prasad Kanungo, Shaktikanta Das voted for 25 basis points rate cut. Ravindra H Dholakia voted for a 40 basis points rate cut.

As a result of the rate cut announced today, the reverse repo rate under the liquidity adjustment facility (LAF) is now 4.90 per cent, and the marginal standing facility (MSF) rate and the Bank Rate will be 5.40 per cent, RBI Governor Shaktikanta Das said.

Inflation in August accelerated to a 10-month high but remained well below the central bank’s medium-term target of 4 per cent for a 13th straight month. Retail inflation inched up to 3.21 per cent in August.

The government has mandated RBI to ensure that inflation remains below 4 per cent, with a deviation of 2 per cent either side

This is the fifth rate cut in a row by the RBI; so far the RBI has cut the repo rate by 135 bps in this year. Next monetary policy meeting is scheduled on December 5, 2019.

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