RBI cuts rates by 0.25% to support growth; loans to get cheaper
Mumbai: The Reserve Bank on Friday cut its key rates by 0.25 per cent to boost economy from six-year low saying reduction was necessary to revive growth.
With first quarter GDP growth plunging to 5 per cent, the RBI cut its estimate of economic growth in the current fiscal to 6.1 per cent from its earlier estimate of 6.9 per cent.
The repo rate, at which it lends to the system, has been brought down to 5.15 per cent to help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.
This is the fifth straight cut in rates by the Reserve Bank in its key rates in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.
Highlights of RBI's monetary policy statement:
- Repo rate or short-term lending rate reduced by 25 bps to 5.15 pc
- It is fifth rate cur in 2019
- GDP growth forecast lowered for current fiscal to 6.1 pc from 6.9 pc earlier
- RBI continues with its accommodative monetary stance to revive economic growth
- Government stimulus measures to help strengthen private consumption and spur investments
- Continuing slowdown warrants intensified efforts to restore growth momentum
- Retains retail inflation projection for second half of year at 3.5-3.7 pc
- RBI notes monetary transmission has been staggered and incomplete
- Foreign exchange reserves stood at USD 434.6 bn on Oct 1, up USD 21.7 bn over March-end 2019
- All members of rate-setting Monetary Policy Committee (MPC) voted for rate cut
- Next monetary policy review meet scheduled during December 3-5, 2019