RBI MPC decision: Repo rate cut by 25 bps to support growth, stance changed to accommodative

The monetary policy committee (MPC) of the Reserve Bank of India (RBI), which met for the first time in the current financial year under the new central bank governor Sanjay Malhotra, on April 9 cut the repo rate by 25 basis point (Bps) to 6%. The MPC also decided to change the stance to accommodative from neutral.

This is the second time in a row that the central bank has cut repo rate to aid growth amid global uncertainties. Last time in February policy, the RBI had cut repo rate for the first time in five years. The repo rate is the interest rate at which the central bank lends to other banks in the country.

"Accordingly, with respect to the policy rate, which is the mandate of the MPC, today’s change in stance from ‘neutral’ to ‘accommodative’ means that going forward, absent any shocks, the MPC is considering only two options – status quo or a rate cut," the governor said in his statement.

The move is in line with a Moneycontrol poll of economists, treasury heads, and fund managers, which had predicted a 25 bps rate cut.

As a result, the standing deposit facility (SDF) rate remains changed to 5.75 % and the marginal standing facility (MSF) rate and the Bank Rate at 6.25%.

Experts had said that lower Consumer Price Index (CPI) inflation allows the MPC to focus more on growth amid global uncertainties and paves way for another rate cut, which will further boost demand in the current scenario.