Insta
For Second Consecutive Time RBI Cuts Repo Rate By 25 Basis Points To 6 Per Cent; Policy Stance Stays Neutral
Swarajya Staff
Apr 04, 2019, 12:25 PM | Updated 12:25 PM IST
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
For the second time in as many months, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) cut its repo rate (the rate at which it lends to banks) by 25 basis points, from the 6.25 per cent to 6 per cent. The Committee has continued to maintain its monetary policy stance at neutral.
While four of the six-member of the MPC voted in favour of the rate cut, the remaining two voted in negative. Earlier on 7 February, MPC had reduced the policy repo rate by 25 basis points from 6.5 per cent to 6.25 per cent with immediate effect.
However, analysts note that the current rate cut will do little to bring down the interest rates charged by banks on loans to individuals and corporate entities. Due to weak policy transmission in India’s banking system, the February rate cut of 25 basis from RBI’s side led to a token cut of only 5-10 basis points by banks.
Deposit-Credit Conundrum
On the other hand, banks have pointed out that they are unable to cut interest rates more aggressively as they currently face an acute shortage of deposits. Any significant cut in interest rates for loans will mean that banks have to bring down the interest they pay to depositors. With lower deposit rates, customers will park their surplus money in other financial avenues rather than with the banks.
MPC created under the current NDA government, is the apex authority that decides on the interest rates in India.
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
Introducing ElectionsHQ + 50 Ground Reports Project
The 2024 elections might seem easy to guess, but there are some important questions that shouldn't be missed.
Do freebies still sway voters? Do people prioritise infrastructure when voting? How will Punjab vote?
The answers to these questions provide great insights into where we, as a country, are headed in the years to come.
Swarajya is starting a project with an aim to do 50 solid ground stories and a smart commentary service on WhatsApp, a one-of-a-kind. We'd love your support during this election season.
Click below to contribute.