RBI Cuts Policy Rate By 0.25 Pc To 6 Percent, Makes Loans Cheaper

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New Delhi: The Reserve Bank of India on Wednesday slashed benchmark repo rate by 25 bps from the present 6.25 per cent to 6 per cent – the lowest in six and a half years. This was sixth bi-monthly policy review by RBI’s Monetary Policy Committee that was formed last year on the lines of Federal Open Market Committee in the US.

The MPC has six members RBI governor Urjit Patel, two deputy governors and three government representatives. This development comes against the backdrop of the government, economists and lenders pushing hard for a rate cut which the RBI has held since October last year when Urjit Patel had announced a 25 bps cut in his first policy review as RBI governor.

In its June review meet, the MPC had held the repo rate citing the risk of fiscal slippages, which could entail inflationary spillovers. Forty of 56 economists polled by Reuters predicted the RBI will cut its repo rate by 25 basis points to 6.00 percent – the lowest since November 2010. Cooling food prices sent June consumer inflation to a more than five-year low of 1.54 per cent, way below RBI’s fixed 4 per cent range.