RBI Cuts Repo Rate By 25 Basis Points, GDP Outlook For 2019-20 Revised To 6.1 Per Cent

The Reserve Bank of India (RBI) monetary policy committee on Friday cut repo rate by 25 basis points to 5.15 per cent from 5.40 per cent. The Reverse repo rate has also been adjusted to 4.90 per cent and bank rate at 5.40 per cent, accordingly. The RBI Governor Shaktikanta Das-headed Monetary Policy Committee (MPC) announced the fourth bi-monthly monetary policy for 2019-20 after its three-day marathon meeting.

This is the fifth consecutive rate cut this year by RBI to support government measures for boosting economic activity amid benign inflation. The RBI lowered its key lending rate or the repo rate by 25 basis points (bps), which would take cumulative cuts so far this year to 135 bps.

The Policy Statement reads, "On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today (October 4, 2019) decided to: reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.15 per cent from 5.40 per cent with immediate effect. Consequently, the reverse repo rate under the LAF stands reduced to 4.90 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 5.40 per cent."

"The MPC also decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target. These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," it said.

The RBI also lowered its GDP growth projection for the current financial year 2019-20 to 6.2 per cent. This is the second time RBI has lowered the GDP growth outlook. In August, it had lowered the projection from 6.9 per cent from 7 per cent, and underlined the need for addressing growth concerns by boosting aggregate demand. RBI projected GDP growth for 2020-2021 at 7.2 per cent.