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RBI cuts repo rate to boost economy, ensures stability of Indian banking system

RBI cuts repo rate to boost economy, ensures stability of Indian banking system

| @indiablooms | 04 Oct 2019, 10:00 am

Mumbai: The Reserve Bank of India on Friday slashed the repo rate by 25 basis points to 5.15% in a bid to revive the sagging economy.

"MPC voted unanimously to reduce the repo rate," RBI Governor Shaktikanta Das said in a press conference post the fourth bi-monthly Monetary Policy Press Conference 2019-20.

Das said the committee decided to maintain the "accommodative stance" as long as it is necessary to revive growth.

Repo rate is the rate at which RBI lends money to banks.

Today’s rate cut is the fifth consecutive reduction in the current calendar year, taking the key lending rate to its lowest since March.

Das, however, declined to comment on the minimum acceptable rate on the repo rate.The Central bank revised the inflation target to 3.4% for the second quarter of the current financial year, while the same was retained at3.5-3.7% for the second half of the current financial year.  The inflation rate for the first quarter of the next financial year has been projected at 3.6%.

The RBI also adjusted reverse repo rate, the rate at which it borrows money from commercial banks, to 4.9%. Earlier, Das had given indications to slashing rates as inflation remained under its medium-term target of 4 per cent.

The RBI lowered the GDP growth projection for 2019-20 to 6.1% from 6.9% owing to slow down across sectors. The GDP for 2020-21 has been revised to 7.2%.

Foreign Exchange Reserves have increased by $21bn from March-end to $434.6 bn on Oct 1.RBI has no doubt that the government will stick to the fiscal deficit number, said Shaktikanta Das and added that RBI is not aware of any government demand for an interim dividend of Rs30,000 crore from it.

He said overall liquidity has been in surplus during August and September last despite outflow of liquidity from the system owing to the expansion of currency in circulation and forex operations by RBI.

The slew of stimulus measures induced by the government will help strengthen private consumption and boost investments, Das stated.

RBI assured that the Indian banking system is sound and stable. "Country's banking system is sound & stable, there is no need for unnecessary panic," stated Shaktikanta Das.

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