Reserve Bank of India cuts repo rate by 50 bps: Key highlights

By: | Updated: September 29, 2015 5:47 PM

Home loans are set to become cheaper after the Reserve Bank of India on Tuesday in its monetary policy review announced to cut repo rate by 50 basis points to 6.75 per cent.

raghuram-rajan-rbi-ep-LRBI Monetary policy review: Raghuram Rajan has announced to cut the repo rates by 50 basis points.

In a surprise move, Reserve Bank of India on Tuesday in its monetary policy review  announced to cut repo rate by 50 basis points to 6.75 per cent.

Earlier, a Reuters poll last week showed only one out of 51 economists had expected a 50 basis points rate cut, while 45 had expected a 25 bps cut.

Here are the highlights from RBI monetary policy review

-RBI cuts policy rate by 50 basis points to 4-year low  from 7.25 per cent of 6.75 per cent.
-RBI keeps CRR unchanged at 4 per cent.
-GDP growth estimate to 7.4%; expects pick up towards the latter part of the fiscal
-Inflation to stay below January 2016 target of 6% in FY16; will average 5.5% for FY17
– RBI says inflation is expected to reach 5.8% in January 2016
– RBI to issue final guidelines on base rate computation by November-end
-Limit for FPI investment in govt bonds to be increased in phases to 5% of outstanding stock by March 2018
– continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise net demand and time liability (NDTL) at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and
– continue with daily variable rate repos and reverse repos to smooth liquidity
– Limits for FPI investment in debt securities will be henceforth announced or fixed in rupee terms
– RBI to issue final guidelines on base rate computation by November-end
-Fifth Bi-monthly Monetary Policy on December 1

Most of market experts were predicting a 25 basis point cut this time in the benchmark repo rate. SLR and CRR are expected to remain unchanged.

The RBI had kept its benchmark lending rate viz. the repo rate unchanged at 7.25 per cent in its August 4 monetary policy review.

The data on Wholesale Price Index (negative 4.9 per cent) and Consumer Price Index (3.66 per cent) continued to reflect a benign inflationary environment.

 

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