The RBI, on October 4, 2019, cut interest rates for the fifth time in a row, reducing the repo rate by 0.25%, to bring it to 5.15%
The Reserve Bank of India (RBI), on October 4, 2019, cut the key interest rate for the fifth consecutive time, as it reduced the repo rate by 25 basis points (0.25%) to 5.15%, to boost the slowing economy. The six-member monetary policy committee (MPC) also maintained an ‘accommodative policy stance with a view to reviving growth’.
However, the RBI also cut the GDP growth forecast for the current fiscal to 6.1%, from 6.9% earlier. The central bank also expressed concern that the monetary transmission has been staggered and incomplete.
Banks with exposure to poorly-run NBFCs will have to take larger haircuts: RBI governor
Banks will have to take more haircuts, while resolving the stressed loans extended to non-banking lenders who are found wanting on the corporate governance front, RBI governor Shaktikanta Das has warned
September 20, 2019: In resolving the crisis at NBFCs that have major governance issues, banks need to take a larger haircut, Reserve Bank of India (RBI) governor Shaktikanta Das said, on September 19, 2019. “These are business failures but there is also an element of administrative or governance lapses in them,” Das said. Das’ comment on non-banking finance companies (NBFCs) comes at a time, when banks are grappling with the resolution of stressed cases like the over Rs 50,000-crore dues from mortgage financier DHFL.
Das further said banks will have to take a ‘balanced call’, while dealing with the issues of stressed loans. He, however, made it clear that the RBI will not immediately resort to using recent amendments in the statutes, which empower it to take control of an NBFC, as the first priority would be to find ‘market-based’ solutions for the same. Market-based solutions can involve promoters cutting stake, new promoters coming in or securitisation of the assets to raise resources to come out of liquidity issues. He said the RBI continues to monitor the 50 largest NBFCs on a continuing basis and it will be using the powers of the amended statutes, only if any need arises.
The going has been tough for NBFCs over the last one year, since infra-focused sectoral major IL&FS started defaulting on its loans, triggering a liquidity crisis among NBFCs. NBFCs typically depend on short-term borrowing to finance long-term assets like home loans, which has led to the troubles in the sector, the RBI had said.
FM Announces Rs 20,000 Crores Fund To Finish Stuck Projects, Relaxes ECB Guidelines
FM Sitharaman has announced last mile funding for non-NCLT and non-NPA affordable and middle-income projects
September 14, 2019: The Finance Minister Nirmala Sitharaman on September 14, 2019 has announced a slew of measures for the real estate sector to fund stuck housing projects and ease borrowing norms for lenders financing affordable home buyers. These measures include-
Relaxation of ECB Guidelines under Affordable Housing: The external commercial borrowing (ECB) guidelines will be relaxed to facilitate the financing of home buyers who are eligible under PMAY, in consultation with the RBI. This will be in addition to the existing norms for ECB for affordable housing.
House Building Advance: The interest rate on House Building Advance will be lowered and linked with the 10-year G Sec Yields (7.7-7.75%). This move is expected to encourage more government employees to buy new houses
Special funding for affordable and middle-income housing: A special window for providing last-mile funding for non-NPA and non-NCLT affordable and middle-income category projects which are Net Worth positive will be set up. The government of India will contribute Rs 10,000 crore and the same amount will be contributed by outside investors. The fund will be managed by professionals from the housing and banking sectors. The objective is to focus on the construction of unfinished units.
“Projects that are 60% complete shall get last mile funding through special window. We will not interfere with the projects that are under NCLT. The tribunal will decide what has to be done. About 3.5 lakh dwelling units to benefit from this,” says Finance Minister Nirmala Sitharaman.
Banks to reduce home loan interest rates, says FM while announcing economic stimulus measures
The government, on August 23, 2019, announced a slew of measures, including the banks’ decision to cut interest rates, a move that would lead to lower EMIs for home, auto and other loans; upfront infusion of Rs 70,000 crores to public sector banks, in efforts to boost economic growth from a five-year low; the rollback of enhanced super-rich tax on foreign and domestic equity investors, exemption of start-ups from ‘angel tax’, a package to address distress in the auto sector.
Finance minister Nirmala Sitharaman, who had been flooded with demands from different sectors after her maiden budget in 2019, promised to continue the reforms and announce more measures. She announced an immediate infusion of Rs 70,000 crores into banks, to boost their liquidity and lending capacity of banks by Rs 5 lakh crores, while housing finance companies would get up to Rs 30,000 crores, with a view to reviving the real estate sector.
“Banks have again decided to launch repo rate or external benchmarking-linked loan products. This will, therefore, result in reduced EMI for housing loans, vehicle and other retail loans by directly linking repo rate to the interest rates, which means the moment reduction happens, it will directly benefit end customers,” Sitharaman said. She said the move would also lead to cheaper working capital loans for the industry.
SBI chairman Rajnish Kumar said bank recapitalisation at one go, would provide a big impetus to credit growth. The lender has already started benchmarking its loans to repo and now other banks are likely to follow suit, he added. Other measures announced to boost the economy, include setting up of an entity for credit enhancement for infrastructure and housing projects, a task force to finalise the pipeline of infrastructure projects and simplification of Know Your Client (KYC) procedure to improve market access for foreign investors.
“Linking of repo rates directly to home loan rates, will aid the home buyers to avail of faster and cheaper home loans. This rejig of spending model by government, is a clear intent to stoke demand and ease bank credit, which had taken a hit across the industry,” said Niranjan Hiranandani, national president, NAREDCO.
The infusion of Rs 70,000 crores in PSBs, along with various initiatives announced by the FM, will boost market sentiments and revive many sectors, particularly the automobile, MSME, consumer and retail sectors. Housing will get a big boost, with Rs 30,000-crore funds, including Rs 10,000 crores already given to the NHB, for refinance facility to HFCs. With measures to resolve home buyers’ and developers’ problems expected, the economy is expected to come back to normalcy in 3-4 months,” said Deo Shankar Tripathi, MD and CEO of Aadhar Housing Finance.
UCO Bank, Allahabad Bank cut MCLR
Following the repo rate cut by the RBI, state-run lenders Allahabad Bank and UCO Bank have slashed their marginal cost of funds-based lending rate (MCLR) by 15 to 20 basis points, across all tenors
August 12, 2019: Days after the 35 bps repo rate cut by the Reserve Bank of India (RBI), state-run lenders Allahabad Bank and UCO Bank, on August 9, 2019, slashed their marginal cost of funds-based lending rate (MCLR) across all tenors. Allahabad Bank said it has reduced its MCLR by 15 to 20 basis points (bps) for different tenors, effective from August 14, 2019, while another public sector lender UCO Bank announced that it has cut the same by 15 bps, across all tenors.
“The benchmark one-year MCLR has been reduced by 15 bps to 8.5 per cent, as against 8.65 per cent earlier,” UCO Bank said in a statement. The one-year MCLR is the rate based on which the retail loans such as home, car and personal advances are linked, the lender said. UCO Bank is planning to link the rate of interest with the RBI’s repo rates, to pass on the benefit to customers.
See also: SBI lowers lending rates by 0.15%, effective August 10, 2019
Allahabad Bank also said it has decided to reduce the rate of interest on retail term deposits by 10 bps, across all terms over one year. Allahabad Bank’s MD and CEO SS Mallikarjuna Rao, said the bank will be exploring the development of products of both, assets and liabilities, linked with an external benchmark, to transmit the benefits of rate cut to its customers, shortly.
RBI slashes interest rate by 0.35%, making it the fourth cut in a row
The RBI, on August 7, 2019, cut interest rates for the fourth time in a row, reducing the repo rate by 0.35%, to bring it to 5.40%
August 7, 2019: The Reserve Bank of India (RBI), on August 7, 2019, cut the key interest rate for the fourth consecutive time, as it reduced the repo rate by 35 basis points (0.35%) to 5.40%, to boost the slowing economy. The six-member monetary policy committee (MPC) also maintained the accommodative stance on the monetary policy. In the earlier three policies, it reduced the repo rate by 25 basis points, each time.
See also: SBI lowers lending rates by 0.15%, effective August 10, 2019
The fourth consecutive rate cut, is expected to lower equated monthly instalments (EMIs) for home and auto buyers and borrowing costs for corporates. The 35 basis points (bps) cut in repo is unusual, as the RBI has been changing the interest rate by 25 or 50 bps, in the past. When asked why the RBI opted for a 35-basis point rate cut, RBI governor Shaktikanta Das said it is not unprecedented and added that a 25-basis point reduction was inadequate, while 50 bps was excessive. So, the MPC took a balanced callm he said.
Noting that inflation was currently projected to remain within the target, over a 12-month horizon, the MPC said since the last (June 2019) policy, domestic economic activity continued to be weak, with the global slowdown and escalating trade tensions posed downside risks. It said that even as the past rate cuts were being gradually transmitted to the real economy, the benign inflation outlook provided headroom for policy action, to close the negative output gap.
The RBI also revised real GDP growth for 2019-20 downwards, to 6.9% from 7% in the June policy. CPI inflation is projected at 3.1% for the second quarter of FY20 and 3.5%-3.7% for second half of FY20, with risks evenly balanced, it said.
Bankers agree to take steps, to pass on RBI’s rate cuts
The Finance Ministry has said that banks have agreed to take steps to review lending rates, as they have not ‘commensurately’ transmitted the benefits of reductions in the policy rate by the RBI, to borrowers
August 6, 2019: Since December 2018, the monetary policy has been eased substantially by the Reserve Bank of India (RBI), with policy rates being cut by 75 basis points (bps) and the policy outlook being changed to ‘accommodative’. “Banks need to commensurately transmit the rate cut benefits in lending. In the meeting, banks agreed to take steps as per RBI guidelines, to review their lending rates,” said an official release, on August 5, 2019. The release was issued after a meeting between finance minister Nirmala Sitharaman and heads of public sector banks (PSBs), as well as private lenders, including HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and CitiBank.
Financial services secretary Rajiv Kumar said a range of issues connecting to credit growth, micro, small and medium enterprises (MSMEs), automobiles, timely transmission of rate cuts, digitisation and service tax-related issues, were discussed at length. “The idea is to take stock of everything and spur credit growth, especially in the automobile sector, in the agriculture sector, in the MSMEs and also look at the ‘co-origination’ with the NBFCs and HFCs, where the banks have the credit availability, so that they can join hands together and lending reach to the last mile,” Kumar said.
See also: Are home buyers really getting the benefit of rate cuts by the RBI?
Touching upon the issue of home buyers discussed in the meeting, the minister said the Supreme Court has already come out with its verdict in the case of one of the big realty firms. However, in case of another, the ministry had consultations with various stakeholders. “On another (developer), we have had a group of ministers meeting with all the respective authorities, whether it was the Noida Authority, or the Yamuna Expressway Authority, together with representatives of Uttar Pradesh, with the Union Minister of Urban Development Hardeep Singh Puri and the concerned secretaries – banking, revenue and company affairs,” she said. Sitharaman said there have been extensive meetings and the government hopes to move forward in that direction.
On funding to MSME and non-banking financial company (NBFC) sectors, she said the meeting discussed about ways to improve lending to these businesses. The minister said there is a complex matrix of governance-related, solvency-related and liquidity-related issues. RBI deputy governor NS Vishwanathan, who also attended the meeting, said the banking system has adequate and durable liquidity currently.
Sitharaman talked about issues related to the increase in public shareholding in listed companies from 25 per cent to 30 per cent as well as levy of surcharge on super riches. She said market regulator SEBI has already started consultations with various stakeholders about the increase in public shareholding to 30% in listed entities. About levy of surcharge on foreign portfolio investors (FPIs) as part of tax on super riches announced in the Budget 2019-20, she said, “I did mention that there are FPIs who are going to tell me something about it and I am quite open to hearing out what they want to tell me. And towards that, I have not just left it at that.” She said Department of Economic Affairs (DEA) Secretary Atanu Chakraborty has clearly culled out time to meet with the FPIs so that the ministry can have their views.
RBI cuts interest rates for the third time this year, to boost growth
Amid concerns over a slowing economy, the Reserve Bank of India has cut interest rates for the third time this year, lowering the repo rate by 0.25%, to 5.75%
June 6, 2019: Slashing the benchmark lending rates for the third time this year, the Reserve Bank of India (RBI) cut its repo rate by 0.25% on June 6, 2019 and said its future monetary policy stance will be more accommodative. The repo rate, at which the central bank lends to the system, will come down to 5.75% after the cut.
See also: RBI to create specialised cadre for regulation of banks and NBFCs
Amid concerns of a slowdown in the economy, the central bank lowered its gross domestic product (GDP) forecast to 7% for the current fiscal from 7.2% projected earlier. While marginally increasing its inflation projection to 3%-3.1% for the first half of the fiscal year 2019-20, which is within the comfort range of 2%-6% set by the government, the RBI cut the GDP growth targets sharply to 7% for FY20, on the back of a weak global scenario and dip in private consumption.
“The MPC (monetary policy committee) notes that growth impulses have weakened significantly. A sharp slowdown in investment activity, along with a continuing moderation in private consumption growth, is a matter of concern,” read the policy resolution.
The Reserve Bank of India (RBI), on October 4, 2019, cut the key interest rate for the fifth consecutive time, as it reduced the repo rate by 25 basis points (0.25%) to 5.15%, to boost the slowing economy. The six-member monetary policy committee (MPC) also maintained an ‘accommodative policy stance with a view to reviving growth’.
However, the RBI also cut the GDP growth forecast for the current fiscal to 6.1%, from 6.9% earlier. The central bank also expressed concern that the monetary transmission has been staggered and incomplete.
Banks with exposure to poorly-run NBFCs will have to take larger haircuts: RBI governor
Banks will have to take more haircuts, while resolving the stressed loans extended to non-banking lenders who are found wanting on the corporate governance front, RBI governor Shaktikanta Das has warned
September 20, 2019: In resolving the crisis at NBFCs that have major governance issues, banks need to take a larger haircut, Reserve Bank of India (RBI) governor Shaktikanta Das said, on September 19, 2019. “These are business failures but there is also an element of administrative or governance lapses in them,” Das said. Das’ comment on non-banking finance companies (NBFCs) comes at a time, when banks are grappling with the resolution of stressed cases like the over Rs 50,000-crore dues from mortgage financier DHFL.
Das further said banks will have to take a ‘balanced call’, while dealing with the issues of stressed loans. He, however, made it clear that the RBI will not immediately resort to using recent amendments in the statutes, which empower it to take control of an NBFC, as the first priority would be to find ‘market-based’ solutions for the same. Market-based solutions can involve promoters cutting stake, new promoters coming in or securitisation of the assets to raise resources to come out of liquidity issues. He said the RBI continues to monitor the 50 largest NBFCs on a continuing basis and it will be using the powers of the amended statutes, only if any need arises.
The going has been tough for NBFCs over the last one year, since infra-focused sectoral major IL&FS started defaulting on its loans, triggering a liquidity crisis among NBFCs. NBFCs typically depend on short-term borrowing to finance long-term assets like home loans, which has led to the troubles in the sector, the RBI had said.
FM Announces Rs 20,000 Crores Fund To Finish Stuck Projects, Relaxes ECB Guidelines
FM Sitharaman has announced last mile funding for non-NCLT and non-NPA affordable and middle-income projects
September 14, 2019: The Finance Minister Nirmala Sitharaman on September 14, 2019 has announced a slew of measures for the real estate sector to fund stuck housing projects and ease borrowing norms for lenders financing affordable home buyers. These measures include-
Relaxation of ECB Guidelines under Affordable Housing: The external commercial borrowing (ECB) guidelines will be relaxed to facilitate the financing of home buyers who are eligible under PMAY, in consultation with the RBI. This will be in addition to the existing norms for ECB for affordable housing.
House Building Advance: The interest rate on House Building Advance will be lowered and linked with the 10-year G Sec Yields (7.7-7.75%). This move is expected to encourage more government employees to buy new houses
Special funding for affordable and middle-income housing: A special window for providing last-mile funding for non-NPA and non-NCLT affordable and middle-income category projects which are Net Worth positive will be set up. The government of India will contribute Rs 10,000 crore and the same amount will be contributed by outside investors. The fund will be managed by professionals from the housing and banking sectors. The objective is to focus on the construction of unfinished units.
“Projects that are 60% complete shall get last mile funding through special window. We will not interfere with the projects that are under NCLT. The tribunal will decide what has to be done. About 3.5 lakh dwelling units to benefit from this,” says Finance Minister Nirmala Sitharaman.
Banks to reduce home loan interest rates, says FM while announcing economic stimulus measures
The government, on August 23, 2019, announced a slew of measures, including the banks’ decision to cut interest rates, a move that would lead to lower EMIs for home, auto and other loans; upfront infusion of Rs 70,000 crores to public sector banks, in efforts to boost economic growth from a five-year low; the rollback of enhanced super-rich tax on foreign and domestic equity investors, exemption of start-ups from ‘angel tax’, a package to address distress in the auto sector.
Finance minister Nirmala Sitharaman, who had been flooded with demands from different sectors after her maiden budget in 2019, promised to continue the reforms and announce more measures. She announced an immediate infusion of Rs 70,000 crores into banks, to boost their liquidity and lending capacity of banks by Rs 5 lakh crores, while housing finance companies would get up to Rs 30,000 crores, with a view to reviving the real estate sector.
“Banks have again decided to launch repo rate or external benchmarking-linked loan products. This will, therefore, result in reduced EMI for housing loans, vehicle and other retail loans by directly linking repo rate to the interest rates, which means the moment reduction happens, it will directly benefit end customers,” Sitharaman said. She said the move would also lead to cheaper working capital loans for the industry.
SBI chairman Rajnish Kumar said bank recapitalisation at one go, would provide a big impetus to credit growth. The lender has already started benchmarking its loans to repo and now other banks are likely to follow suit, he added. Other measures announced to boost the economy, include setting up of an entity for credit enhancement for infrastructure and housing projects, a task force to finalise the pipeline of infrastructure projects and simplification of Know Your Client (KYC) procedure to improve market access for foreign investors.
“Linking of repo rates directly to home loan rates, will aid the home buyers to avail of faster and cheaper home loans. This rejig of spending model by government, is a clear intent to stoke demand and ease bank credit, which had taken a hit across the industry,” said Niranjan Hiranandani, national president, NAREDCO.
The infusion of Rs 70,000 crores in PSBs, along with various initiatives announced by the FM, will boost market sentiments and revive many sectors, particularly the automobile, MSME, consumer and retail sectors. Housing will get a big boost, with Rs 30,000-crore funds, including Rs 10,000 crores already given to the NHB, for refinance facility to HFCs. With measures to resolve home buyers’ and developers’ problems expected, the economy is expected to come back to normalcy in 3-4 months,” said Deo Shankar Tripathi, MD and CEO of Aadhar Housing Finance.
UCO Bank, Allahabad Bank cut MCLR
Following the repo rate cut by the RBI, state-run lenders Allahabad Bank and UCO Bank have slashed their marginal cost of funds-based lending rate (MCLR) by 15 to 20 basis points, across all tenors
August 12, 2019: Days after the 35 bps repo rate cut by the Reserve Bank of India (RBI), state-run lenders Allahabad Bank and UCO Bank, on August 9, 2019, slashed their marginal cost of funds-based lending rate (MCLR) across all tenors. Allahabad Bank said it has reduced its MCLR by 15 to 20 basis points (bps) for different tenors, effective from August 14, 2019, while another public sector lender UCO Bank announced that it has cut the same by 15 bps, across all tenors.
“The benchmark one-year MCLR has been reduced by 15 bps to 8.5 per cent, as against 8.65 per cent earlier,” UCO Bank said in a statement. The one-year MCLR is the rate based on which the retail loans such as home, car and personal advances are linked, the lender said. UCO Bank is planning to link the rate of interest with the RBI’s repo rates, to pass on the benefit to customers.
See also: SBI lowers lending rates by 0.15%, effective August 10, 2019
Allahabad Bank also said it has decided to reduce the rate of interest on retail term deposits by 10 bps, across all terms over one year. Allahabad Bank’s MD and CEO SS Mallikarjuna Rao, said the bank will be exploring the development of products of both, assets and liabilities, linked with an external benchmark, to transmit the benefits of rate cut to its customers, shortly.
RBI slashes interest rate by 0.35%, making it the fourth cut in a row
The RBI, on August 7, 2019, cut interest rates for the fourth time in a row, reducing the repo rate by 0.35%, to bring it to 5.40%
August 7, 2019: The Reserve Bank of India (RBI), on August 7, 2019, cut the key interest rate for the fourth consecutive time, as it reduced the repo rate by 35 basis points (0.35%) to 5.40%, to boost the slowing economy. The six-member monetary policy committee (MPC) also maintained the accommodative stance on the monetary policy. In the earlier three policies, it reduced the repo rate by 25 basis points, each time.
See also: SBI lowers lending rates by 0.15%, effective August 10, 2019
The fourth consecutive rate cut, is expected to lower equated monthly instalments (EMIs) for home and auto buyers and borrowing costs for corporates. The 35 basis points (bps) cut in repo is unusual, as the RBI has been changing the interest rate by 25 or 50 bps, in the past. When asked why the RBI opted for a 35-basis point rate cut, RBI governor Shaktikanta Das said it is not unprecedented and added that a 25-basis point reduction was inadequate, while 50 bps was excessive. So, the MPC took a balanced callm he said.
Noting that inflation was currently projected to remain within the target, over a 12-month horizon, the MPC said since the last (June 2019) policy, domestic economic activity continued to be weak, with the global slowdown and escalating trade tensions posed downside risks. It said that even as the past rate cuts were being gradually transmitted to the real economy, the benign inflation outlook provided headroom for policy action, to close the negative output gap.
The RBI also revised real GDP growth for 2019-20 downwards, to 6.9% from 7% in the June policy. CPI inflation is projected at 3.1% for the second quarter of FY20 and 3.5%-3.7% for second half of FY20, with risks evenly balanced, it said.
Bankers agree to take steps, to pass on RBI’s rate cuts
The Finance Ministry has said that banks have agreed to take steps to review lending rates, as they have not ‘commensurately’ transmitted the benefits of reductions in the policy rate by the RBI, to borrowers
August 6, 2019: Since December 2018, the monetary policy has been eased substantially by the Reserve Bank of India (RBI), with policy rates being cut by 75 basis points (bps) and the policy outlook being changed to ‘accommodative’. “Banks need to commensurately transmit the rate cut benefits in lending. In the meeting, banks agreed to take steps as per RBI guidelines, to review their lending rates,” said an official release, on August 5, 2019. The release was issued after a meeting between finance minister Nirmala Sitharaman and heads of public sector banks (PSBs), as well as private lenders, including HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and CitiBank.
Financial services secretary Rajiv Kumar said a range of issues connecting to credit growth, micro, small and medium enterprises (MSMEs), automobiles, timely transmission of rate cuts, digitisation and service tax-related issues, were discussed at length. “The idea is to take stock of everything and spur credit growth, especially in the automobile sector, in the agriculture sector, in the MSMEs and also look at the ‘co-origination’ with the NBFCs and HFCs, where the banks have the credit availability, so that they can join hands together and lending reach to the last mile,” Kumar said.
See also: Are home buyers really getting the benefit of rate cuts by the RBI?
Touching upon the issue of home buyers discussed in the meeting, the minister said the Supreme Court has already come out with its verdict in the case of one of the big realty firms. However, in case of another, the ministry had consultations with various stakeholders. “On another (developer), we have had a group of ministers meeting with all the respective authorities, whether it was the Noida Authority, or the Yamuna Expressway Authority, together with representatives of Uttar Pradesh, with the Union Minister of Urban Development Hardeep Singh Puri and the concerned secretaries – banking, revenue and company affairs,” she said. Sitharaman said there have been extensive meetings and the government hopes to move forward in that direction.
On funding to MSME and non-banking financial company (NBFC) sectors, she said the meeting discussed about ways to improve lending to these businesses. The minister said there is a complex matrix of governance-related, solvency-related and liquidity-related issues. RBI deputy governor NS Vishwanathan, who also attended the meeting, said the banking system has adequate and durable liquidity currently.
Sitharaman talked about issues related to the increase in public shareholding in listed companies from 25 per cent to 30 per cent as well as levy of surcharge on super riches. She said market regulator SEBI has already started consultations with various stakeholders about the increase in public shareholding to 30% in listed entities. About levy of surcharge on foreign portfolio investors (FPIs) as part of tax on super riches announced in the Budget 2019-20, she said, “I did mention that there are FPIs who are going to tell me something about it and I am quite open to hearing out what they want to tell me. And towards that, I have not just left it at that.” She said Department of Economic Affairs (DEA) Secretary Atanu Chakraborty has clearly culled out time to meet with the FPIs so that the ministry can have their views.
RBI cuts interest rates for the third time this year, to boost growth
Amid concerns over a slowing economy, the Reserve Bank of India has cut interest rates for the third time this year, lowering the repo rate by 0.25%, to 5.75%
June 6, 2019: Slashing the benchmark lending rates for the third time this year, the Reserve Bank of India (RBI) cut its repo rate by 0.25% on June 6, 2019 and said its future monetary policy stance will be more accommodative. The repo rate, at which the central bank lends to the system, will come down to 5.75% after the cut.
See also: RBI to create specialised cadre for regulation of banks and NBFCs
Amid concerns of a slowdown in the economy, the central bank lowered its gross domestic product (GDP) forecast to 7% for the current fiscal from 7.2% projected earlier. While marginally increasing its inflation projection to 3%-3.1% for the first half of the fiscal year 2019-20, which is within the comfort range of 2%-6% set by the government, the RBI cut the GDP growth targets sharply to 7% for FY20, on the back of a weak global scenario and dip in private consumption.
“The MPC (monetary policy committee) notes that growth impulses have weakened significantly. A sharp slowdown in investment activity, along with a continuing moderation in private consumption growth, is a matter of concern,” read the policy resolution.
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