Admitting slowdown, RBI lowers growth forecast to 6.9 percent

RBI Cuts Repo Rate by 35 bps To Help Boost Economic Growth

This is the fourth straight cut by the central bank’s monetary policy committee in 2019

Based on his interactions, Das said the government is planning more measures to revive growth, and also pointed out to finance minister Nirmala Sitharaman's statements on sector-specific booster doses on the anvil.

The reverse repo rate under the LAF (liquidity adjustment facility) has been reduced to 5.15 per cent from earlier 5.50 per cent, and the marginal standing facility (MSF) rate and the bank rate has been reduced to 6.0 per cent.

With a 35 basis points cut in interest rates, it is highly likely that banks would reduce interest rates on home loans, vehicle loans, auto loans etc. While the announcement is in line with widespread expectations of a rate reduction, the RBI usually carries out changes in repo rates in multiples of 25 bps.

The Reserve Bank of India (RBI) on Wednesday cut its benchmark interest rates for a fourth straight meeting, and by slightly more than expected, highlighting the depth of its concern about economic growth that's slid to its slowest pace in almost five years.

Talking to reporters after the meeting, SBI chairman Rajnish Kumar had said he was hopeful of another rate cut by MPC. "Various high frequency indicators suggest weakening of both domestic and external demand conditions", said the Reserve Bank of India, adding that it had revised the projection downwards to 6.9%.

The Reserve Bank of India on Wednesday maintained an accomodative stance on monetary policy and said retail inflation would remain within targeted band.

This is the fourth straight cut by the central bank's monetary policy committee (MPC) in 2019.

The RBI noted that global economic activity has slowed down since the previous monetary policy meeting in June owing to trade tensions among leading economies.

Aggregate demand, investment activity remain sluggish.

Inflation outlook: The committee projected the CPI inflation at 3.1 per cent for the second quarter of the financial year 2019-20 (FY20) and 3.5-3.7 per cent for the second half of the fiscal year (H22019-20), with risks evenly balanced.

The RBI also allowed banks to classify loans to NBFCs for key areas such as agriculture, housing and small and medium businesses - up to certain limits - as priority sector lending, in a bid to keep credit flowing to the parts of the economy where most Indians work.

'RBI has done its part' Making sure banks are actively working towards growth like RBI is, is much more necessary in the current situation.

It further said that the emerging markets stocks lagged behind their developed market counterparts, mainly reflecting the weak performance of Chinese and South Korean stocks.

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