Home, auto loans set to be cheaper as RBI cuts repo rate by 25 bps to 6%

After the rate reductions, the reversed repo rate stands adjusted at 5.75 percent.

New Delhi: The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das on Thursday announced reduction of repo rates by 0.25 bps points to 6% in its first bi-monthly monetary policy of 2019-20 on Thursday.

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

The repo rate under the liquidity adjustment facility (LAF) has been reduced by 25 basis points to 6.0 percent from 6.25 percent with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 percent, RBI said.

"These  decisions  are  in  consonance  with  the  objective  of  achieving  the  medium-term  target  for  consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent, while supporting growth," RBI added.

The RBI MPC's three-day meeting started on Tuesday. Maintaining a neutral stance on the monetary policy, 5 out of 6 members of the MPC voted in favour of the rate cut. Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra and Shri Shaktikanta Das voted  in  favour  of  the  decision  to  reduce the  policy  repo  rate  by  25  basis  points.  Dr. Chetan Ghate and Dr. Viral V. Acharya voted to keep the policy rate unchanged.

RBI has projected GDP growth for 2019-20 at 7.2 percent – in the range of 6.8-7.1 per cent in H1:2019-20 and 7.3-7.4 per cent in H2 – with risks evenly balanced.

The next meeting of the MPC is scheduled from June 3 to June 6.

RBI Governor Shaktikanta Das had reduced the repo rate by 25 basis points in February. The interest rate was slashed after a gap of 18 months.