RBI Cuts Repo Rate For Fourth Time This Year To 9-Year Low Of 5.4%

TPI Staff August 7, 2019

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Mumbai: For the fourth time in a year Reserve Bank of India (RBI) on Wednesday cut the repo rate to 5.4% from the current 5.75% amid low inflation, faltering economic growth and uncertain global scenario.

The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das announced the decision after a three-day meeting.

On February 7, April 4 and June 6, the central bank had reduced the key lending rate by 25 basis points each time to infuse liquidity and push growth.

Both Sensex and Nifty turned volatile after the RBI slashed lending rate and lowered the GDP growth estimates for the current financial year. After swinging nearly 300 points, the 30-share index was trading 20.61 points, or 0.06 per cent, lower at 36,956.24 around noon. The broader Nifty also fell 3.20 points, or 0.03 per cent, to 10,951.45.

Repo rate is the rate at which the RBI lends money to commercial banks. Reductions in the repo rate can reduce interest rates for consumers on bank loans, and lower monthly instalments on home loans, car loans and personal loans. According to government figures, India’s economy grew by only 6.8% in 2018-19.

In the fourth quarter (January to March), the growth rate fell to 5.8%, marking a five-year low of inflation at 3.18% in June. Remains below the RBI’s moderate target of 4% for almost a year.

Industry leaders say bank lending rates are needed to drastically cut repo rates and boost manufacturing and boost domestic demand for economic growth.

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