RBI monetary policy: Repo rate cut by 25 bps; key highlights from the statement

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.

File image of RBI Governor Urjit Patel. AFP

File image of RBI Governor Urjit Patel. AFP

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.

repo rate

Updated Date: Aug 02, 2017 17:40 PM

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