The Reserve Bank of India cut the key interest rate by 25 base points to push the economy
further. The new repo rate comes a week before national election and the policy committee attests that it has maintained a neutral stand on the trajectory of interest rates.
The neutral alignment helps the banking authority revert either ways on key rates. Four members out of the six member committee of monetary policy decided for the 25 basis points while the two members argued to keep the rates unchanged. 85 per cent of the economists had forecasted that RBI would slash the benchmark lending rate by 25-6
per cent today.
For the FY 2019-20, the RBI projected a GDP growth of 7.2 per cent. For the current FY RBI expects a growth of 6.8-7.1 per cent in first half and 7.3-7.4 per cent in the second
half. Today’s repo rate cut signals that commercial banks will have more time to pass on the lower lending rates to loan borrowers. The depositors will only earn lower interest rates.