Much awaited Reserve Bank Of India cut Repo rates by 25bps to 6%, At third Bimonthly policy review, The six member Monetary Policy Committee (MPC) committee of the Reserve Bank of India slashed the short-term lending rate, or repo rate, by 25 basis points to 6 per cent. As India’s retail inflation declined to a record low of 1.54 per cent in June, there were expectations of an interest rate cut, with the government pushing the central bank had to reduce lending rates.
As per the RBI governor Urjit Patel, there is a scope for banks to reduce lending rates, RBI also cut reverse repo rate – this is the rate at which the central bank borrows money from commercial banks by 25 basis points to 5.75 per cent from 6 per cent. MSF(Marginal Standing Facility rate — This is the rate at which banks borrow overnight funds from RBI against approved government securities — and the bank rate were also adjusted to 6.25 per cent.
On Tuesday, India’s largest lender and market leader The State Bank of India reduced interest rate on savings bank deposits by 50 basis points, putting more pressure on the RBI to go for the rate cut.Out of six members of Monitor policy committee, four members voted for a rate cut. In its previous bi-monthly review the in June, the committee retained the repo rate at 6.25% for the fourth straight time citing risk to inflation. Monetary Policy Committee(MPC) headed by RBI governor Urjit Patel stressed on the need to rejuvenate private investments, fixing infra bottlenecks and provide big thrust to Pradhan Mantri Awas Yojana.
