RBI cuts key rate by 25 bps, changes neutral stance to accommodative

RBI,Reserve Bank of India,RBI policy

It means, more rate cuts are in the offing in the coming quarters.

The six-member monetary policy committee (MPC) cut the repo rate to 5.75% as predicted by 44 of 66 analysts polled by Reuters last week.

Besides, the RBI changed the monetary policy stance from neutral to accommodative.

The move is expected to lead to reduction of lending rate by banks leading to lower EMI for housing, auto loan and corporate borrowers.

Committee to submit its recommendations within two months of its first meeting.

Benchmark interest rate was cut by 0.25 per cent to 5.75 per cent from 6.00 per cent, a move that would result in lower cost of borrowing for the banks that are expected to pass on the benefits to individuals and corporates.

Further, RBI today announced that it has chose to do away with charges levied on RTGS and NEFT transactions, and asked banks to pass this benefit to their customers. The announcement comes two days after the RBI Monetary Policy Committee convened over the policy.

Weak global demand due to an escalation in trade wars may further impact India's exports and investment activity, the central bank believes.

The Supreme Court's April 2 order raised questions over the fate of about eight power projects including the 3,600 MW KSK Mahanadi Power Co Ltd, 1,920 MW Lanco Amarkantak Power Ltd, 600 MW Avantha Power, 1,350 MW Rattan India Power Ltd, 550 MW RKM Powergen and 700 MW Bharat Utkal. The inflation outlook for the back half of the fiscal year in March was put at 3.4-3.7%, down from an earlier projection of 3.5-3.8%.

Last week, government data showed GDP growth slowed to a five-year low of 5.8 per cent in the fourth quarter (Q4) of FY19.

The MPC also revised the retail inflation forecast to to 3.0-3.1 per cent for the fist half of the fiscal 2019-20 and to 3.4-3.7 per cent for the second half.

The RBI under its new Governor Shaktikanta Das has cut its key rates by a cumulative 0.50 percent since he took charge.

The brokerage also said that the transmission to lending rate cuts to prop up growth "needs sustained RBI easing", it said.

RBI has lowered GDP growth forecast for 2019-20 to 7 per cent from 7.2 per cent, governor Shaktikanta Das said.

Tariff wars between the USA and China has impacted global trade and and financial markets.

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