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August 02, 2017

RBI Monetary Policy Review Highlights : Cuts Repo Rate by 25 bps to 6%

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After keeping its key policy rate unchanged at 6.25% for a long time, the Reserve Bank of India (RBI) today cuts its repo rate by 25 basis points to 6.00% during bi-monthly policy review. This is the lowest in more than six-and-a-half years. The Reverse repo rate has also been cut by 0.25 per cent to 5.75 per cent.

The rate cut comes after a slump in food prices sent June consumer inflation to a record low of 1.54%. The rate cut will boost credit growth which has been sluggish over last few quarters. Here are the major highlights of today's monetary policy review.

Highlights RBI's Third Bi-monthly Monetary Policy

  • Key policy rate reduced by 0.25 percent to 6 percent.
  • Reverse repo rate cut by 0.25 percent to 5.75 percent.
  • Focus on keeping headline inflation close to 4 percent on Durable basis.
  • Some risks to inflation have reduced or not materialised.
  • Growth forecast unchanged at 7.3 percent for the current fiscal.
  • Pushes for reinvigorating private investments, clearing Infra bottlenecks and providing big thrust to PMAY.
  • Forex reserves at USD 392.9 billion as on July 28.
  • Four members of Monetary Policy Committee voted in favour of 0.25 percent rate cut.
  • Farm loan waivers by states may result in fiscal slippages, Undermine public spending quality.
  • Government, RBI working to resolve large NPAs and Recapitalise public sector banks.
  • High levels of stress in twin balance sheets banks and Corporations are likely to deter new investment.
  • Next MPC meeting on October 3 and 4, 2017.

Important Points to Note :
  • The RBI had last cut key rates in October 2016. 
  • The current rate of 6 per cent is the lowest since November 2010.
  • With this, RBI became the first central bank in Asia to cut rates this year.
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