Mumbai: The Reserve Bank of India cut the repo rate or lending rate by 25 basis points to 6.25 percent from 6.5 per cent. Banks will pass the RBI rate cut to its customers. This comes in the monetary policy review on Tuesday.
The rate decision began a new era for the RBI, where the policy decision was made by a committee for the first time. Earlier, decisions were taken solely by the RBI governor.
It was also the first policy review under Governor Urjit Patel who last month replaced Raghuram Rajan. Dr Patel is joined by two Reserve Bank officials and three government nominated academics on monetary policy committee or MPC. The committee is bound by an inflation target of 4 per cent, plus or minus 2 percentage points as per its mandate, under the government’s monetary policy framework agreement with the RBI.
“The decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of /- 2 per cent, while supporting growth,” the RBI said in a statement. RBI said that six members of the monetary policy committee in favour of the rate cut. The minutes of the MPC’s meeting will be published on October 18, 2016.
Markets have welcomed the move with Sensex rising 100 points and nifty crossing 8750.