RBI cuts repo rate by 25 bps to 5.15%

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India on Friday slashed the short-term lending rate, repo rate, by 25 basis points in its fourth bimonthly policy review.

The MPC decided to continue with an accommodative stance as long as "it is necessary to revive growth, while ensuring that inflation remains within the target."

All members of the MPC voted in favour of reducing the repo rate. Chetan Ghate, Pami Dua, Michael Debabrata Patra, Shri Bibhu Prasad Kanungo and Shri Shaktikanta Das voted for the 25 basis points rate cut. Ravindra H Dholakia voted for a 40 basis points rate cut.

The domestic stock market saw a sudden fall in response to the money policy outcome and the BSE Sensex traded 66 points higher at 38,172 after the policy announcement. The index was up 200 points in early trade.

This was the fifth consecutive rate cut effected by the Shaktikanta Das-led panel, and it was in addition to a cumulative 110 basis points rate cut that RBI has announced so far this year.

The repo rate now stands at 5.15 per cent, the lowest since March 2010.

The rate cut came much in line with expectations, as benign inflation expectations offered policymakers room to try and revive a slowing economy. The RBI cut its GDP growth estimate for FY20 to 6.1 per cent compared with 6.9 per cent earlier. A few analysts were expecting the MPC to deliver an 'out-of-the box' rate cut of 35-40 basis points. #casansaar (Source - RBI, PTI, Economic Times)