RBI cuts key rate by 25 bps, changes neutral policy stance to accommodative

Mumbai: The Reserve Bank of India (RBI) cut key lending rates by another 25 basis points to 5.75 per cent on Thursday.

In the second bi-monthly monetary policy of 2019-20 under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut.

The Monetary Policy Committee (MPC) also decided to change the neutral monetary policy stance to accommodative.

Benchmark interest rate was cut by 0.25 per cent to 5.75 per cent from 6.00 per cent, a move that would result in lower cost of borrowing for the banks that are expected to pass on the benefits to individuals and corporates.

Accordingly, the reverse repo rate under the Liquidity Adjustment Facility (LAF) stands adjusted to 5.50 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.00 per cent.

Amid concerns of a slow down in the economy, GDP projection for 2019-20 is kept at 7.00 per cent from 7.2 per cent for the first half of 2019-20, he added.

RBI also increased its inflation estimate to 3-3.1 per cent from 2.6 per cent for the fiscal year 2019-20.

(With agency inputs)