The Reserve Bank of India announced its monetary policy review today. Here are six important takeaways
-Reserve Bank Governor Raghuram Rajan cut the key interest rate by 0.25 per cent, third time this year, meeting market and government expectations of boosting growth by lowering borrowing cost. While the RBI cut the repo rate from 7.5 per cent to 7.25, it left all other policy tools like cash reserve requirement unchanged at 4 per cent and Statutory Liquidity Ratio (SLR) at 21.5 per cent.
– The Governor asked banks to follow suit and pass on the rate cuts — 0.75 per cent since January — to individual and corporate borrowers.
– The Reserve Bank lowered the economic growth forecast for the current fiscal to 7.6 per cent from 7.8 per cent projected in April, citing various risks, including poor monsoon and rising crude oil prices.
-Rajan said that the central bank will keep an eye on how monsoon progresses and the steps taken by the government to mitigate its negative effects.
-The inflation levels for January 2016 have also been hiked to six percent from an earlier estimate of 5.8 percent.
– On the revival of investment demand, he said there is a need for “unclogging” of stalled investment projects, stabilising of private new investment intentions, and improving sales of commercial vehicles.