RBI cuts repo rate by 25 bps, lowers FY20 GDP forecast to 6.1%

The Reserve Bank of India cut the repo rate by 25 basis points to 5.15% on Friday, 4 October, saying the reduction was necessary to revive growth.

With the first quarter GDP growth plunging to 5%, the RBI cut its estimate of economic growth in the current fiscal to 6.1% from its earlier estimate of 6.9%.

Rates have now been cut by 135 basis points since the beginning of the year.

The repo rate, at which it lends to the system, has been brought down to 5.15% to help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.

This is the fifth straight cut in rates by the Reserve Bank in its key rates in as much policy reviews in 2019, and takes the total proportion of reductions to 1.35%.

“Government promoting measures will help strengthen private consumption and encourage private investments,” the monetary policy committee said.

All six members of the monetary policy committee voted for a rate cut. Five of them voted for a 25 basis point cut, while Ravindra Dholakia voted for a larger 40 basis point cut, sources said.