RBI cuts key interest rate, loans become cheaper

RBI cuts key interest rate, loans become cheaper

Agency News

New Delhi, April 04: The Reserve Bank of India (RBI) has decided to reduce repo rate by 25 basis points or 0.25 per cent to 6 per cent. RBI’s Monetary Policy Committee(MPC) has taken the decision, meeting a majority of economists' expectations. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks. More than 85 per cent of the nearly 70 economists polled by news agency Reuters had expected the central bank to cut the benchmark lending rate by 25 basis points to 6.00 per cent on April 4.

The RBI sees economy to grow in the range of 6.8-7.1 per cent in the first half of the current financial year and in range of 7.3-7.4 per cent in the second half with risks evenly balanced. Thursday's rate revision - the second reduction this calendar year - means commercial banks will have more room to pass on the benefit of lower lending rates to loan borrowers. At the same time it would also translate into a lower interest rate earned by depositors.

The latest policy statement comes after the first bi-monthly review meeting of financial year 2019-20 by the Monetary Policy Committee which began on April 2. India's growth in GDP or gross domestic product slowed to 6.6 per cent in the October-December period, its slowest pace recorded since the quarter ended September 2017.

Consumer inflation - gauged by the Consumer Price Index (CPI) - picked up to 2.57 per cent in February from the 19-month low of 1.97 per cent the previous month. The RBI has set a medium-term goal of 4 per cent for consumer inflation, which it tracks primarily to formulate its policy.