RBI cuts interest rates for third time this year to boost growth

Amid concerns of a slow down in the economy, the central bank lowered its gross domestic product (GDP) forecast to 7 per cent for the current fiscal from 7.2 per cent projected earlier.

Saima Siddiqui

Saima SiddiquiBy Saima Siddiqui

Published on 6 Jun 2019 6:46 AM GMT

RBI cuts interest rates for third time this year to boost growth
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Mumbai: Slashing benchmark lending rates for the third time this year, the Reserve Bank of India cut its repo rate by 0.25 per cent Thursday and said its future monetary policy stance will be more accommodative.

Amid concerns of a slow down in the economy, the central bank lowered its gross domestic product (GDP) forecast to 7 per cent for the current fiscal from 7.2 per cent projected earlier.

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The repo rate, at which the the central bank lends to the system, will come down to 5.75 per cent after the cut.

Highlights of RBI's monetary policy statement:

Following are the highlights of the second bi-monthly monetary policy announced by the RBI on Thursday:

-Repo rate reduced by 25 bps to 5.75 pc for third time in a row.

-Reverse repo rate now stands at 5.50 pc, marginal standing facility (MSF) rate 6 pc.

-RBI changes policy stance to accommodative from neutral.

-Cuts GDP growth forecast to 7pc from 7.2 pc for FY20.

-Raises retail inflation forecast for Apr-Sept to 3-3.1 pc and 3.4-3.7 pc in.

Oct-Mar

-Projects upward bias in food inflation in near term due to rising prices of food items.

-Forecast risks to inflation trajectory from monsoon uncertainties, unseasonal spike in vegetable prices, crude oil prices, financial market volatility and fiscal scenario.

-Waives RTGS and NEFT charges to promote digital transactions.

-Sets up a panel to review ATM charges, fees levied by banks.

-To issue draft guidelines for 'on tap' licensing of small finance banks by Aug.

-Flags sharp slowdown in investments, moderation in private consumption growth as concern.

-All six MPC members voted in favour of 0.25 pc policy rate cut.

-Average daily surplus liquidity in the system at Rs 66,000 crore in early June.

-Foreign Exchange Reserves stood at USD 421.9 billion on May 31, 2019.

-Next monetary policy statement on August 7.

While marginally increasing its inflation projection to 3-3.1 per cent for the first half of the fiscal year 2019-20, which is within the comfort range of 2-6 per cent set by the government, RBI cut the GDP growth targets sharply to 7 per cent for FY20 on weak global scenario and dip in private consumption.

"The MPC (monetary policy committee) notes that growth impulses have weakened significantly A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," read the policy resolution.

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(PTI)

Saima Siddiqui

Saima Siddiqui

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