RBI cuts repo rates by 25 basis points to 6 per cent, second time in 2 months

RBI cuts repo rates by 25 basis points to 6 per cent, this is the second time in 2 months that the Indian central bank has cut lending rates. It was the first back-to-back rate cut by the central bank since Monetary Policy Committee (MPC) was formed in late 2016. This is a second rate cut in a row after February 2019 rate cut of an equal margin. Taking both the rate cuts together, the repo rate has come down by 50 basis points.

"On the basis of an assessment of the current and evolving macroeconomic situation, the MPC at its meeting today decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.0 per cent from 6.25 per cent with immediate effect," the central bank said in a statement.

"Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent. The MPC also decided to maintain the neutral monetary policy stance," the RBI said. The monetary policy stance has been kept neutral. The RBI lowered India's GDP projection to 7.4 per cent from 7.2 per cent.

Repo rate is the rate of interest at which banks borrow money from the RBI. "Export growth remained weak in January and Feb 2019. While, imports specially non-oil gold imports declined," Das said.

This is good news for the new home loan takers as the effective home loan rate for them is expected to come down as MCLR (Marginal Cost of Funds Based Lending Rate ) of banks starts coming down.