RBI cuts repo rate by 25 bps to 5.75%
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The reverse repo rate under the LAF (liquidity adjustment facility) has been adjusted to 5.50 per cent, and the marginal standing facility (MSF) rate and the bank rate to 6.0 per cent. The RBI had retained its "neutral" stance after the rate cut in April but now it has changed its stance to "accommodative". This will be more comforting for the market than just a rate cut, especially in light of the slowdown.
Repo rate is the interest rate at which the RBI lends money to banks. When the cost of borrowing goes down for banks, they are able to lower their respective marginal cost of funds based lending rate (MCLR), which directly impacts your loans.
"These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," RBI said in a statement. Speculation was rife that a bigger 35 bps or even 50 bps rate cut might be announced. The last time the MPC moved this quickly to lower rates was reportedly in 2013 to revive the moribund economy from growth rates that had slipped to a decade low. #casansaar (Source - Business Today)
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