Repo Rate Reduced by 25 Points, Industry Welcomed RBI's Move

The Reserve Bank of India (RBI) lowered its key lending rate for commercial banks by 25 basis points (bps) to 6 per cent.

"On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6 per cent from 6.25 per cent with immediate effect," the RBI said In the first monetary policy review of the current fiscal.

"Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent."

The MPC also decided to maintain the neutral monetary policy stance.

"These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth."

As per our expectations, RBI has cut repo rate by 25 bps to 6 per cent and kept the stance unchanged to ‘Neutral’. This is the second rate cut in the current year. A cut in the repo rate will lead to a reduction of interest rates of new and existing loans for consumers in all segments. Said Mr Ashok Mittal, Founder and CEO of Delhi based digital lender “Prest Loans”.

“This rate cut will act as a sentiment booster and aid not only the companies that have to service large debts but also the small businesses and MSME segment to whom Prest Loans services. This rate cut by RBI will inject more liquidity in the economy. Loans by Banks and NBFCs with a lower rate of interest shall lead to an increase in consumer demand and drive the economy which will help India Inc. to deliver strong earnings growth. Similarly, this will also support the MSME segment to improve their margins.” – he further said.