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October 04, 2016

RBI cuts Repo Rate by 25 bps - 4th Bi-Monthly Policy Review Highlights

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The Reserve Bank of India (RBI) governor Urjit Patel today (4th October 2016) cut the short-term lending rate, or Repo Rate, by 25 basis points to 6.25 per cent from 6.50 per cent earlier. 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 6.75 per cent. This was the first exercise by the monetary policy committee (MPC), chaired by Governor Urjit Patel. All the six committee members voted in favour of the monetary policy decision. The minutes of the MPC’s meeting will be published on October 18.Here are the main highlights of RBI's 4th bi-monthly policy review.

  • This is Patel’s maiden announcement as RBI Governor.
  • This was the central bank’s fourth bi-monthly policy statement for the year 2016-17.
  • This is for the first time that decision-making on interest rates has shifted to the six-member panel (Monetary Policy Committee) which has equal representation from RBI and the government.
  • Since January last year, the RBI has cut the repo-rate – the rate at which RBI lends to banks – five times. 
  • New Changes in Policy Rates :
    • Repo Rate - 6.25% earlier it was 6.50 %
    • Reverse Repo Rate - 5.75 % earlier it was 6.00%
    • MSF -  6.75% earlier it was 7.00%
    • Bank Rate - 6.75 % earlier it was 7.00%
  • The next meeting of the MPC is scheduled on December 6 and 7, 2016 and its resolution will be announced on December 7.
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