RBIFor the fifth time in a row, RBI’s Monetary Policy Committee (MPC) has cut down the key repo rate intending to increase demand and private consumption despite the economic slowdown. In the policy meeting that took place in August, the Reserve Bank of India’s committee had brought down the repo rate by 35 bps and this has diminished the lending rate by an additional 25 bps.

The RBI has revised the repo rate to 5.15 percent from 5.40 percent. Similarly, the reverse repo rate is also adjusted to 4.90 percent. The decision was passed after all the members of RBI’s Monetary Policy Committee voted unanimously in favour to diminish repo rate along with maintaining an accommodative stance penetrating to the monetary policy.

In the MPC, all members have voted in favour of slashing the policy repo rate for the continuation of the accommodative stance of monetary policy. However, a committee member, Ravindra H. Dholakia, voted to bring down the repo rate by 40 basis points. The sources had hinted at a rate cut of 25 bps as the Reserve Bank of India plans to curb the lending rates to support the Government’s aim to boost economic growth.

Shashikant Das, RBI governor has indicated that the Reserve Bank will focus on rate cut to stay under its medium-term target of four percent.

This rate cut is likely to bring down interest on home loan particularly after all the banks are told to follow the same pattern from 1st October. Apart from this, the RBI has also slashed the GDP growth outlook for 2019-20 to 6.1 percent from 6.9 percent in the previous bi-monthly MPC meeting.

The GDP outlook for the year 2020-21 is revised to 7.2 percent.