The reserve repo rate was at 4.9%.
The reserve repo rate was at 4.9%.

RBI cuts repo rate by 25 bps to 5.15%

  • All the six members of the MPC had voted unanimously for the change in policy rates and stance
  • RBI MPC maintained accomodative stance leaving room for more cuts in future

Mumbai: The Reserve Bank of India’s monetary policy committee (MPC) on Friday announced a 25 basis points cut in its policy rates while maintaining an accommodative policy stance till the time growth revives.

With this move, the repo rate which is the rate at which banks borrow from RBI stands reduced to 5.15% and reverse repo rate to 4.9%. A Mint survey of bankers and economists had said that RBI is expected to reduce policy rates by 25 basis points, while a minority expected a 40 basis points cut.

The MPC noted that “accommodative stance will be maintained as long as it is necessary to revive growth while ensuring that inflation remains within the target," leaving room for more rate cuts in future.

All the six members of the MPC had voted unanimously for the change in policy rates and stance. While Chetan Ghate, Pami Dua, Michael Debabrata Patra, Bibhu Prasad Kanungo and Shaktikanta Das voted to reduce the repo rate by 25 basis points, Ravindra H. Dholakia voted to reduce the repo rate by 40 basis points.

“While the recent measures announced by the government are likely to help strengthen private consumption and spur private investment activity, the continuing slowdown warrants intensified efforts to restore the growth momentum," said RBI in its statement.

The MPC also sharply reduced its growth forecast for the fiscal year 2019-2020 to 6.1% from 6.9% earlier. The committee noted that risks to growth have emerged due to weak domestic demand and sagging export prospects on account of continuing trade tensions. MPC on the other hand retained its consumer price inflation forecast for the second half of the fiscal year 2019-202 as expected at 3.5%-3.7%

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