Reserve Bank of India (RBI) The 6 -member monetary policy committee, in view of inflation decrease and softening in growth rate, today reduced the repo rate by 25 basis points to 6.25 per cent. This is expected to reduce interest rates. The interest rate has been cut for the first time after about 5 years. This move of RBI can make the loan cheaper and reduce interest on deposits. All 6 members of the Monetary Policy Committee voted for reducing the repo rate and keeping the monetary policy neutral.
The rate has been cut despite the overall inflation being above 5 per cent. RBI Governor Sanjay Malhotra said in the first monetary policy committee meeting under his chairmanship that further inflation is expected to decrease. He said that inflation has softened and it is likely to decrease further. The growth rate will also be better than the second quarter but it will be less than the last financial year.
Malhotra said, ‘There has been scope to speed up the growth rate due to the speed of growth-inflation. However, attention will remain on reducing inflation. He said that the committee has kept the policy stance neutral as it believes that the monetary policy with low restrictions is more suitable in the current family. The RBI governor said that the global financial markets have excessive instability and uncertainty in global trade policies with an increase in uncertainty and inflation that remained firm. He said that keeping this in mind, the stance has been kept neutral. The RBI said that further rate cuts will depend on increase and inferior figures, but the market hopes that the central bank may further cut the rate.