The apex bank of India, RBI today cut its repo rate by 25 basis points to 6%. Under new chief Shaktikanta Das, this is the second consecutive rate cut. The first time slash came as a complete flabbergast in the month of February. Surprisingly, 41 out of 43 economists had predicted a cut repo rate by 25 bps in the backdrop of weakening economic growth and increased inflation.
The RBI has also lowered its GDP growth outlook for the year 2019-20. RBI expects a GDP of 7.2% for 2019-20 which is lower than its February projection of 7.4%. “There are some signs of domestic investment activity weakening as reflected in a slowdown in production and imports of capital goods. The moderation of growth in the global economy might impact India exports", stated the RBI.
The Reserve Bank of India issues a document named “Statement on Developmental and Regulatory Policies" along with its announcement. These documents include announcements on new committees are being formed to examine reforms. This time as well, two new committees have been announced, the reports of which are expected in August 2019. One of the committees is being formed to examine the efficacy of introducing a secondary market in mortgages and the other one is for the study of development of secondary market for corporate loans.
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The Central Bank also put forward its bi-monthly monetary policy statement for 2019-20. Under this policy statement, for smoother transmission of interest rates from the central bank to a commercial bank lending rates, the central bank has decided to delay the introduction of an ‘external interest rate’ benchmark. The RBI said that further consultations with stakeholders will be held to chalk out an "effective mechanism for transmission of rates".