Fifth Cut by RBI in slashing repo rate
The Reserve Bank of India (RBI) slashed the repo rate by 0.25 percent from 5.40 per cent to 5.15 percent on Friday during its fourth bi-monthly policy review. This is the fifth cut in the repo rate by the RBI in 2019 to reduce borrowing costs for home and auto loans. These changes are getting implemented with a view to see the GDP outlook for the year 2020-21 has been revised to 7.2 per cent.
The RBI monetary policy committee announced a 25 basis points cut in its policy rates from 5.40% to 5.15%. The RBI Governor also said that it would maintain an ‘accommodative stance’ as long as it is necessary to revive growth. The reverse repo rate was also adjusted to 4.90%. The central bank said the decisions are in consonance with its medium-term target of 4 per cent for consumer inflation. After the fall of first-quarter GDP growth rate to 5 per cent, the RBI has also slashed the GDP growth forecast for the current fiscal from its previous estimate of 6.9 percent to 6.1 percent.
RBI governor Shaktikanta Das had given a strong indication earlier that the central bank would be inclined towards cutting rates further as inflation continues to remain under its medium-term target of four per cent.
RBI maintains accommodative policy stance with a view to reviving growth,he added. “RBI marginally revised up retail inflation forecast to 3.4% for Q2, but retains estimates for H2 at 3.5-3.7 percent,” Das added.
The announcements issued by the six-member Monetary Policy Committee (MPC) came three days after the meeting. The rate cut comes at a time when the Indian economy is facing a slowdown since the fall in economic activity after the global financial crisis of 2008-09.