RBI announces 25 base point cut in repo rate

RBI

Monetary Policy Committee of Reserve Bank of India met for its 3rd bi-monthly policy review today. The major outcome of the meeting included the announcement of 25 basis points cut in short term lending rate, also known as repo rate in banking terms. After the latest cut, the repo rate now stands at 6 percent.

There were speculations about a cut in interest rates since a bit of time, RBI had not made any changes in the interest rate in its last bi-monthly policy review and since then, people were waiting for the interest rate cut announcement. Before this, the last rate cut was announced in October 2016 and since then, RBI was waiting to analyse the long term effects of demonetization. The Monetary Policy Committee of RBI is headed by RBI governor Urjit Patel.

The MPC has 6 members and out of them, 4 voted in favour of a 25 bps rate cut, whereas, one of the members voted for 50 points cut. However, keeping the fluctuations in mind, RBI went for 25 points cut.

Along with repo rate, there was a significant cut in reverse repo rate as well. The updated reverse repo rate will not stand at 5.75 percent. Marginal Standing Facility and bank rate have been updated to 6.25 percent.