The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) reduced interest rates by 25 basis points to 5.75% with immediate effect amid slowing economic growth and rising global uncertainty, for the 3rd time in a row.
RBI Governor Shaktikanta Das announced it in the second bi-monthly monetary policy statement for 2019-20.
Purpose:
The reduction is expected to bring down the EMIs on home and auto loans, and reduce the debt repayment burden on corporates.
What is repo rate?
It is the rate at which the central bank of a country, that is RBI, lends money to commercial banks in the event of any shortfall of funds. The monetary authorities use this to control inflation. The banks can borrow money for about 7 to 14 days from the Reserve Bank of India.
Policy rates and Reserve ratios:
Policy Repo Rate: 5.75%
Reverse Repo Rate: 5.50%
Marginal Standing Facility Rate: 6.00%
Bank Rate: 6.00%
CRR: 4%
SLR: 19.00%
