RBI cuts repo rate by 25 basis points to 5.75 percent

Published: Jun 06, 2019, 12:05 IST | mid-day online desk | Mumbai

The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das concluded its second meeting for the fiscal year 2019-20

Shaktikanta Das. Pic/AFP
Shaktikanta Das. Pic/AFP

The Reserve Bank of India (RBI) cut repo rate on Thursday to 5.75 percent from the current 6 percent amid falling economic growth and uncertain global scenario for the third consecutive time this year.

The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das concluded its second meeting for the fiscal year 2019-20. On February 7 and April 4, the central bank had reduced the key lending rate by 25 basis points to infuse liquidity and push growth.

Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans and lowers equal monthly installments on home loans, car loans, and personal loans.

India's economy grew just 6.8 percent in 2018-19, according to government data. In the fourth quarter (January to March), the growth dipped to 5.8 percent, marking a five-year low.

Meanwhile, headline inflation stood at 2.9 percent year-on-year in April, below the RBI's target of 4 percent. Industry leaders say a substantial cut in the repo rate and bank lending rates are needed to boost manufacturing and domestic demand and bolster economic growth.

However, there is another concern among government officials that commercial banks with massive bad debts and weak deposit growth are not automatically passing through the RBI's repo rate cuts to borrowers.

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