The Monetary Policy Committee has cut the repo rate by 25 bps to 5.75 percent. One basis point is a hundredth of a percentage point. The repo rate is the rate at which banks borrow from the central bank.
Here are the key takeaways from the policy meet:
- The MPC unanimously votes 6-0 for a rate cut, the second since its inception in October 2016
- The RBI has changed its policy stance to accommodative from neutral. This means it sees scope to accommodate growth concerns by supporting efforts to boost demand and reinvigorate private investment
- The RBI cuts its FY20 GDP growth forecast to 7 percent from 7.2 percent
- April to September FY20 GDP growth forecast cut to 6.4-6.7 percent from 6.8-7.1 percent
- September 2019 to March 2020 GDP growth forecast revised to 7.2-7.5 percent from 7.3-7.4 percent
- The central bank has raised its H1 FY20 consumer inflation estimate to 3-3.1 percent from 2.9-3 percent
- To issue draft for “on-tap” licensing of small finance banks by August-end
- To issue instructions on banks' leverage ratio before June 30
- Group on liquidity management framework expected to submit report by mid-July
- High-frequency indicators show service sector activity moderation
- To scrap RBI transaction charge for RTGS, NEFT systems
- To form committee to study ATM charges, fees
- Repo rate slips to the lowest level since July 2010
- Inflation expectations of households unchanged for one-year horizon
- Risks to inflation outlook remain broadly balanced
- Headline inflation remains below target after pass-through of two rate cuts
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