The Reserved Bank of India (RBI) announced a slash down in key interest rates by 25 points, which translates to 0.25 to 6 basis percent – bringing cheers to the market and investors in second consecutive time within a month.
In the first bi-monthly meeting for financial year 2019-20, the six members of the Reserved Bank of India voted with a 4:2 majority to bring the repo rates by another 25 basis points. The decision to revise key interest rates is the second in this year, with the RBI reducing repo rates by 25 basis points to 6.25 percent on February 7, 2019. The consecutive revisions in repo rates is the result of the central bank’s efforts to revive the monetary policy stance from calibrated tightening. This is also the first back-to-back rate cut since the Monetary Policy Committee (MPC) was formed in 2016 and has called the policy stance to be “neutral”.
The reduction in repo rates for key interest is a welcome move for marketers and investors, and is expected to gauge the consumer inflation and boost economic activities like loans. After the implementation of revised repo rates, the GDP growth for 2019-20 is projected at 7.2 percent – with 6.8 to 7.1 percent in the first half and 7.3 to 7.4 percent in the second half of FY 2019-20. With the cut down in repo rates, the central bank is expecting private sector banks and money lenders to extend the benefits of lower interests to end users.