RBI Monetary Policy October 2019 Highlights: The Reserve Bank of India has cut the repo rate by 25 basis points in today’s review, the fifth time in a row. Since February, the RBI has cut the repo rate by 135 basis points. The repo rate is now 5.15 per cent. However, the latest cut in the repo rate is more likely to make the retail loans cheaper as most of the banks have started to issue repo rate-linked loans. Earlier, the measures related to the reduction in the lending rates could not reach the end customer substantially.
“The RBI has already cut rates by 110 basis points in its four meetings but the transmission is bad. Only 30-40 per cent of repo rate cuts are actually transferred into a lower lending rate,” Pranjul Bhandari of HSBC Securities and Capital Markets said in an interview with ET Now.
Due to the projection of continuing weak demand, volatile oil prices and near-term price pressures, the RBI has also revised CPI inflation projection slightly upwards to 3.4 per cent for Q2 FY20, while projections are retained at 3.5-3.7 per cent for H2 FY20. However, given that inflation is still within the RBI’s target range, the RBI has maintained its stance as ‘accommodative’. Meanwhile, amid the sustained weakness in demand, the RBI has lowered the GDP forecast for the current fiscal year to 6.1 per cent from 6.9 per cent.