Reserve Bank lowers repo, bank rates

Reserve Bank lowers repo, bank rates

The Reserve Bank of India on Wednesday unexpectedly cut its repo rate by 25 basis points to 7.5 per cent from 7.75 per cent with immediate effect.

The RBI had last cut the repo rate by 25 bps on January 15 and maintained status quo in its sixth bi-monthly monetary policy on February 3.

Cash Reserve Ratio (CRR) of scheduled banks has been kept unchanged at 4 per cent of net demand and time liabilities (NDTL). Reverse repo rate has been adjusted to 6.5 per cent, while the marginal standing facility (MSF) rate and the bank rate have also been brought down to 8.5 per cent with immediate effect.

“Softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are co-operative. Given low capacity utilisation and still weak indicators of production and credit offtake, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation,” RBI governor Raghuram Rajan said in a statement.

Bankers welcome rate cut

Bankers welcomed the move saying it could help the government's move for fiscal consolidation. “We welcome the repo rate cut by the RBI....Our bank will take an appropriate call on a cut in the base rate by looking at all evolving circumstances,” Arundhati Bhattacharya, chairman, State Bank of India, said.

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