India’s central bank cuts key interest rate

New Delhi: India’s central bank on Wednesday slashed benchmark lending rate by 0.25 per cent to 6 per cent citing reduction in upside risk to inflation, a move that will lower EMIs for home, auto and personal loans.
This is the first rate cut since October 2016 and the interest rate is now at 6-year low.
In line with record low retail inflation, the RBI Governor headed Monetary Policy Committee (MPC) cut policy repo rate by 25 basis points to 6 per cent and the reverse repo by similar proportion to 5.75 per cent.
The MPC has also decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 per cent.
It stressed on urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana.
The Reserve Bank of India (RBI) said it is working in close coordination with the government to resolve large stressed corporate borrowings and recapitalise public sector banks.
The finance ministry said the RBI's decision to cut key policy rate by 0.25 per cent is an important step to achieve sustained growth consistent with moderate inflation and India's potential.
RBI Governor Urjit Patel said the central bank has maintained the economic growth projection at 7.3 per cent for the current fiscal.
Commenting on the central bank's decision, Economic Affairs Secretary Subhash Chandra Garg said the government welcomes the repo rate cut.
The government has taken note of the statement of the MPC and its assessment of the inflation and growth outlook, he added.
"We welcome the 25 basis points cut in the repo rate as an important step necessary to converge towards the appropriate real monetary conditions for sustained growth consistent with India's potential and for stable, moderate inflation," Garg said.
The government had been pitching for a rate cut to boost economic growth amid retail inflation falling to a historic low of 1.54 per cent in June.
The monetary policy statement was arrived after a two-day meeting of the MPC headed by RBI Governor Urjit Patel.
The MPC has decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 per cent.
The MPC has also decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 per cent.
It has stressed on urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana.
The RBI said it is working in close coordination with the government to resolve large stressed corporate borrowings and recapitalise public sector banks. - PTI