The Reserve Bank of India in its monetary policy review today cut its key lending rate or repo rate by 25 basis points to nearly six-year low of 6.25 per cent, from 6.5 per cent. Banks are likely to pass on the RBI rate cut to customers.
Today’s rate decision began a new era for the RBI, where the policy decision was made by a committee for the first time. Earlier, decisions were taken solely by the RBI governor.
It was also the first policy review under Governor Urjit Patel who last month replaced Raghuram Rajan. Dr Patel is joined by two Reserve Bank officials and three government nominated academics on monetary policy committee or MPC. The committee is bound by an inflation target of 4 per cent, plus or minus 2 percentage points as per its mandate, under the government’s monetary policy framework agreement with the RBI.
“The decision of the MPC is consistent with an accommodative stance of monetary policy in consonance with the objective of achieving consumer price index inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band of /- 2 per cent, while supporting growth,” the RBI said in a statement.
Markets have cheered the move with Sensex rising 100 points and Nifty trading firm above 8,750.