RBI Monetary Policy 2019-20 Highlights : Cuts Interest Rate to 9-Year Low

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In the second bi-monthly monetary policy statement for 2019-20, the 6 member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) led by Governor Shaktikanta Das cut the Repo rate by 25 basis points (bps) to 5.75 per cent. Repo rate is the rate at which the apex bank lends short-term money to commercial banks. This is the 3rd reduction in the year and also the lowest in 9 years. The reverse repo rate under the LAF stands adjusted to 5.50 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.0 per cent. One basis point is one-hundredth of a percentage point. Here are the major highlights of the RBI's 2nd Bi-Monthly Monetary Policy statement.

 RBI Monetary Policy Highlights

• Repo rate reduced by 25 bps to 5.75 per cent for third time in a row
• Reverse repo rate now stands at 5.50 per cent, marginal standing facility (MSF) rate 6 per cent
• RBI changes policy stance to accommodative from neutral
• Cuts GDP growth forecast to 7 per cent from 7.2 per cent for FY20
• Raises retail inflation forecast for April-September to 3-3.1 per cent and 3.4-3.7 per cent in October-March
  
• Projects upward bias in food inflation in near term due to rising prices of food items
• Forecast risks to inflation trajectory from monsoon uncertainties, unseasonal spike in vegetable prices, crude oil prices, financial market volatility and fiscal scenario
• Waives RTGS and NEFT charges to promote digital transactions
• Sets up a panel to review ATM charges, fees levied by banks
• To issue draft guidelines for ‘on tap’ licensing of small finance banks by August
• Flags sharp slowdown in investments, moderation in private consumption growth as concern
• All six MPC members voted in favour of 0.25 per cent policy rate cut
• Average daily surplus liquidity in the system at ₹ 66,000 crore in early June
• Foreign Exchange Reserves stood at USD 421.9 billion on May 31, 2019
• Note : The next bimonthly monetary policy statement will be held on 7th August 2019

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