RBI cuts key rate by 35 bps to boost economic activitiy

Mumbai: The Reserve Bank of India (RBI) cut key lending rates by another 35 basis points to 5.40 per cent on Wednesday.

The repo rate is lowest since April 2010.

Benchmark interest rate was cut by 0.35 per cent to 5.40 per cent from 5.75 per cent amid low inflation, faltering economic growth and uncertain global scenario.

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.

RBI trims GDP growth forecast for current fiscal to 6.9 per cent from 7 per cent previously predicted.

As per the government data, India’s economy grew by only 6.8 per cent in 2018-2019. The growth slipped to 5.8 per cent in the fourth quarter (January to March).

Retail inflation at 3.18 per cent in June has remained below the RBI's medium-term target of 4 per cent for almost a year.

CPI inflation is projected at 3.1 per cent for Q2 FY20 and 3.5-3.7 per cent for H2 FY20, said RBI.

RBI maintains accommodative stance for monetary policy; says inflation to remain within targeted band.

RBI highlights

Following are the highlights of RBI's third monetary policy review for the current fiscal unveiled on Wednesday:

RBI cuts key interest rate (repo) by an unusual 35 basis points (0.35 percentage points) to 5.40 per cent.

Reverse repo rate has been revised to 5.15 per cent *

The marginal standing facility (MSF) rate and bank rate stands at 5.65 per cent

Maintains the accommodative policy stance  

Cuts GDP forecast to 6.9 per cent for the current fiscal from 7 per cent in June policy  

Keeps retail inflation forecast within target of 3.5-3.7 per cent for second half of 2019-20  

Four members voted for cut of 35 basis points in rate; two members voted for 25 basis points rate cut  

Boosting aggregate demand, private investment assume highest priority

Next monetary policy statement on October

(With agency inputs)