The Monetary Policy Committee of the Reserve Bank of India on Thursday decided to lower the repo rate by 25 basis points to 5.75 per cent from 6 per cent. This is third successive cut in repo rate this year.
The repo rate is the interest rate at which banks borrow money from the RBI in the short term and the RBI's decision on Thursday is expected to make loans cheaper.
Economists and market watchers had expected the RBI would cut the repo rate in order to boost economic demand. During its MPC meetings in February and April, the RBI had reduced the repo rate by 25 basis points each. All six members of the MPC—headed by RBI Governor Shaktikanta Das—were in favour of cutting the repo rate. The members of the MPC are Chetan Ghate, Pami Dua, Ravindra H Dholakia, Michael Debabrata Patra, Viral V Acharya and Shaktikanta Das.
The RBI's decision comes a week after the government released data showing that GDP growth had fallen to 5.8 per cent for the quarter ending March 31. The RBI also announced on Thursday that it had lowered its GDP growth projections to 7.0 per cent from the earlier projection of 7.2 per cent.
Further, the RBI, in a statement, said the escalation in trade tensions globally could affect India's export and investment prospects. The RBI noted consumption had weakened in recent months, particularly in rural areas.
