Here are all the big pointers.
Banking and finance experts hailed the RBI's decision to cut the short-term lending rate, terming it as a step in right direction that could help stimulate consumer demand.
The Reserve Bank in its second bi-monthly policy statement for 2019-20 announced to cut the key repo rate, at which it lends to banks, for a third straight time by 25 basis points to 5.75 per cent.
"The policy was very positive and was reinforced by unanimous voting and the change in stance to accommodative. The statement's focus on supporting growth and bolstering private investment as long as inflation remains within the mandate, is also encouraging and leads us to believe that more accommodation is on the cards," said B Prasanna, Group Head Global Markets Sales, Trading and Research, ICICI Bank.
Vasu Ramaswami, COO, Muthoot Fincorp said the latest rate drop should help in improving consumption demand, particularly for the common man, especially once banks decide to pass this rate change to their customers. On the NBFC crisis, Governor Shaktikanta Das said that the RBI is closely monitoring the situation and there is ample liquidity in the market currently.
"The unanimous decision by the Monetary Policy Committee (MPC) to cut the repo rate by another 25 bps is a step in the right direction," said Khushru Jijina, MD, Piramal Capital and Housing Finance.
The downward revision of growth projection to 7 per cent calls for implementation of additional rapid policy interventions by RBI as well as the government.NBFCs are instrumental in providing credit to MSMEs and real estate sectors and more decisive and pro-active policy measures are required to address the current liquidity crisis, Jijina said Shriram Transport Finance MD & CEO Umesh Revankar said consumer spending has been weak on auto sales, real estates because of high interest rates and RBI should open up funding to retail NBFCs through banks that will stimulate consumer spending.
"We may see more measures in the coming days that will help achieve faster and sizeable rate transmission - a pass through of 75 basis of the three rate cuts should happen in the coming months...This may also imply that deposit rates may start falling sharply in the coming days," said R K Gurumurthy - Head Treasury, Lakshmi Vilas Bank.
RBI has also raised marginally the retail inflation projection for the first half of this fiscal to 3-3.1 per cent from 2.9-3 per cent projected earlier.
The decision to cut the repo rate by 25 basis points is a welcome one, this was expected, given the backdrop of low inflation and rising growth concerns in the economy, said Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE.
The rate cut coupled with the budget stimulus for the economy, and the real estate sector in particular, will impact consumer sentiments positively, Magazine said.Mahindra Group CFO, VS Parthasarathy said while the rate cut and stance is good, the transmission and execution will make it great and help the country to rise. "Banking and NBFC are the backbone of the country which need to be nursed back to health. Liquidity is the blood in the veins of this country," he said.
Here are some of the highlights:
1. All charges on RTGS and NEFT transactions waived
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The charges levied on Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) transactions have been scrapped off, in a move to boost digital transactions.
At present, the RBI levies minimum charges on banks for transactions routed through its RTGS system meant for large-value (Rs 2 lakh and above) instantaneous fund transfers and NEFT System for other fund transfers (below Rs 2 lakh). In turn, banks levy charges on their customers.
Usage of ATMs by the people has grown significantly since the demonetisation of Rs 500 and Rs 1,000 banknotes of previous series in November 2016. However, there have been persistent demands to lower the ATM charges.
2. GDP grrowth forecast cut
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With India's GDP growth slipping to a five-year low of 5.8 per cent in the January-March quarter - the first instance of growth falling below China's in last few quarters, the RBI lowered its growth forecast for the economy to 7 per cent from the April view of 7.2 per cent for the 2019-20 April-March fiscal year.
"Growth impulses have weakened significantly," the RBI said in the monetary policy statement.
MPC noted that political stability, high capacity utilisation, buoyant stock markets, an uptick in business expectations in the second quarter and financial flows are positive from a growth perspective.
3. All six MPC members voted to cut repo rate by 25 bps to 5.75%
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In a move that may lead to lower home, auto and other loan EMIs, the RBI Thursday cut interest rates for the third time this year by 25 basis points to their lowest level in nine years and signalled more easing as it looked to support an economy growing at the slowest pace since the BJP first came to power in 2014.
The Reserve Bank of India (RBI) cut the repo rate to 5.75 per cent and reverse repo rate to 5.50 per cent and expected banks to transmit these to home, auto and other loan borrowers faster.
In three back-to-back bi-monthly monetary policies, the RBI has lowered interest rates by 75 basis points (0.75 percentage point).
4. Raised retail and food inflation forecast
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The Reserve Bank Thursday raised the retail inflation forecast marginally to 3-3.1 per cent for the first half of the current fiscal, tracking uptick in food prices - mainly vegetables, albeit expectations of a normal monsoon this year.
In its first bi-monthly policy for FY20 in April, the Reserve Bank of India (RBI) had forecast the retail inflation to be hovering in the range of 2.9-3 per cent for six months till September.
However, the retail inflation projection for the second half of this fiscal has been cut to 3.4-3.7 per cent as against RBI's previous projection of 3.5-3.8 per cent.
5. RBI's assurance to NBFC sector
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The central bank is closely monitoring the developments in the NBFC sector and housing finance companies and will ensure that financial stability is maintained, governor Shaktikanta Das said Thursday.
The comments come following the bond defaults by mortgage lender DHFL on June 4, which led to a slew of rating downgrades of the company. The stock lost more than 20 percent Thursday.
"We have been closely monitoring the performance and developments in the NBFC and HFC sectors," Das told reporters during the customary post-RBI policy conference.
Stating that the central bank is committed to have a robust NBFC sector, Das said, "the RBI will not hesitate to take any measure to ensure financial stability in the sector." After DHFL's bond repayment default, rating agencies Crisil and Icra had on Wednesday downgraded rating on its Rs 850-crore commercial paper to 'default' from 'A4'.
The rating revision factors in further deterioration in DHFL's liquidity profile and delays in meeting scheduled debt obligation on June 4, 2019, Icra had said in a note.
The company has commercial paper worth Rs 750 crore maturing in June with the first repayment on June 7.
