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August 07, 2019

RBI cuts Repo Rate for 4th Time : Monetary Policy Highlights 2019

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The 6 member Monetary Policy Committee of the Reserve Bank of India (RBI) has delivered its 4th successive interest rate cut to support a slowing economy. The benchmark Repo rate, which is the key interest rate at which it lends short-term funds to commercial banks, now was lowered by 35 bps to a 9 year low of 5.4%.

After the repo rate cut by the Reserve Bank of India, equated monthly installments (EMI) for home and other loan borrowers are set to come down. Reverse repo rate stood at 5.15 per cent. The RBI also lowered the GDP growth rate for 2019-20 lower to 6.9%, as compared to earlier estimate of 7%. Finance Minister Nirmala Sitharaman had called for "a significant rate cut" as it "would do a lot of good for the country".

Here are the major highlights of the 3rd Monetary Policy Review of the Reserve Bank of India (RBI) 2019

RBI Monetary Policy Highlights 2019

  • The Reserve Bank of India cuts key interest rate (repo) by an unusual 35 basis points (0.35 percentage points) to 5.40 per cent.
  • Reverse repo rate has been revised to 5.15 per cent.
  • The marginal standing facility (MSF) rate and bank rate stands at 5.65 per cent.
  • Maintains the accommodative policy stance.
  • Cuts GDP forecast to 6.9 per cent for the current fiscal from 7 per cent in June policy.
  • Keeps retail inflation forecast within target of 3.5-3.7 per cent for second half of 2019-20.
  • Four members voted for cut of 35 basis points in rate; two members voted for 25 basis points rate cut.
  • Boosting aggregate demand, private investment assume highest priority.
  • Next monetary policy statement on October 4.
Note : When the RBI cuts rates, banks are expected to pass on the benefit to consumers and reduce interest rates on home, auto, personal or other loans which may result in lower EMIs (equated monthly instalments).

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