RBI cuts repo rate by 25 bps to 6% |
The Reserve Bank of India (RBI) has finally cut interest rate, in line with what the Street was largely expecting. Repo rate - the rate at the which the central bank lends short-term money to banks - was cut by 25 basis points to 6 per cent from 6.25 per cent. RBI`s move comes on the back of inflation running well below its target for consecutive quarters. The central bank had last cut key rates in October 2016. There is scope for banks to reduce lending rates, according to RBI governor Urjit Patel. Forty of 56 economists polled by Reuters had predicted the RBI cutting its repo rate by a 25 basis points. Two respondents had said the central bank would cut the rate by 50 basis points.The RBI also cut reverse repo rate -- the rate at which the central bank borrows money from commercial banks by 25 basis points to 5.75 per cent from 6 per cent. Marginal Standing Facility (MSF) rate -- the rate at which banks borrow overnight funds from RBI against approved government securities -- and the bank rate were also adjusted to 6.25 per cent. After Wednesday`s rate cut, the RBI is forecast to stand pat on policy at least until 2019 because economic growth is set to accelerate, according to a Reuters poll.
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