Reserve Bank of India in its bi-monthly monetary policy has reduced repo rate by 25 basis points to 6.25 per cent. RBI’s six-member monetary policy committee also brought down reverse repo rate to 6 per cent. The repo rate is the rate at which the Reserve Bank lends short-term money to the banks, while the reverse repo rate is the rate at which the central bank borrows money from commercial banks.
It was the first policy review by the RBI after appointment of its governor Shaktikanta Das in December last year. Addressing the media in Mumbai today, Mr Das said that inflation had fallen to 18-month low of 2.19 per cent in December and was expected to remain in the range of 3.2 – 3.4 per cent in April – September which is lower than previous RBI prediction of 3.8 – 4.2 per cent range.
Mr Das also hinted at more rate cuts in future as inflation is slowing down. The RBI governor said that they expect GDP growth rate to be at 7.4 per cent in fiscal 2019-20 which is up from 7.2 per cent estimated for financial year 2018-19 by central statistical organization.