RBI cuts repo rate by 25 basis points to 6%, retains policy stance at Neutral

For the second time in as many months, the Reserve Bank of India (RBI) on Thursday slashed repo rate by 25 basis points to 6 per cent. 

The Reserve Bank of India (RBI) had reduced the repo rate by 25 basis points in February, after a gap of 18 months. A back-to-back cut in interest rate would provide relief to borrowers in the election season.

The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das started its 3-day deliberations on Tuesday. It is the first bi-monthly monetary policy of 2019-20.

RBI said four out of six MPC members voted for rate cut, other two favoured no change in repo rate.

Industry and experts were expecting the banking sector regulator to cut the key lending rate -- at which it lends to commercial banks -- by 0.25 per cent so as to boost the economic activities as fears loom large about global economic slowdown impacting India's growth prospects.

According to industry estimates, inflation is well below the RBI's mandate of 4 per cent and hence it should cut the repo rate (rate at which RBI lends to banks) to boost economic growth. A back-to-back cut in interest rate would provide relief to borrowers in the election season, experts say.

The apex bank projected India's GDP growth for 2019-20 at 7.2 per cent, slashing its earlier projection of 7.4% by 0.2%. The central bank also revised downward retail inflation estimate to 2.4% in Q4 FY19, 2.9-3% in H1 FY20 and 3.5-3.8% in H2 FY20. 

The apex bank also maintains neutral stance on the monetary policy.