Mumbai: The Reserve Bank on Wednesday slashed benchmark lending rate by 0.25 percent to 6 percent citing reduction in upside risk to inflation, a move that will lower EMIs for home, auto and personal loans.
This is the first rate cut since October 2016 and the interest rate is now at 6-year low.
In line with record low retail inflation, the RBI Governor headed Monetary Policy Committee (MPC) cut policy repo rate by 25 basis points to 6 percent and the reverse repo by similar proportion to 5.75 percent.
The MPC has also decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 percent.
Following are the highlights of the Third Bi-monthly Monetary Policy Statement issued by RBI:
* Key policy rate reduced by 0.25 percent to 6 percent.
* Reverse repo rate cut by 0.25 percent to 5.75 percent.
* Focus on keeping headline inflation close to 4 percent on durable basis
* Some risks to inflation have reduced or not materialised.
* Growth forecast unchanged at 7.3 percent for the current fiscal.
* Pushes for reinvigorating private investments, clearing infra bottlenecks and providing big thrust to PMAY.
* Forex reserves at $392.9 billion as on 28 July.
* Four members of Monetary Policy Committee voted in favour of 0.25 percent rate cut.
* Farm loan waivers by states may result in fiscal slippages, undermine public spending quality.
* Government, RBI working to resolve large NPAs and recapitalise public sector banks.
* High levels of stress in twin balance sheets – banks and corporations – are likely to deter new investment.
* Next MPC meeting on 3 and 4 October, 2017.
Updated Date: Aug 02, 2017 17:40 PM