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RBI cuts repo rate, revises real GDP downwards

Lending rate cut by 35 basis points to 5.40 per cent

By PTI in New Delhi

  • Published 7.08.19, 12:22 PM
  • Updated 7.08.19, 12:22 PM
Shaktikanta Das.
Shaktikanta Das. PTI file photo

The Reserve Bank on Wednesday cut the repo rate by 35 basis points to 5.40 per cent to boost a slowing economy.

Repo is the rate at which banks borrow funds from the RBI, usually on an overnight basis.

The central bank also revised the real GDP growth for 2019-20 downwards to 6.9 per cent from 7 per cent in the June policy.

Consumer Price Index inflation is projected at 3.1 per cent for the second quarter of financial year 2019-20 and 3.5-3.7 per cent for the second half of the year, with risks evenly balanced.

The six-member monetary policy committee (MPC)  noted that inflation was currently projected to remain within the target over a 12-month ahead horizon, the committee said since the last (June) policy, domestic economic activity continued to be weak, with the global slowdown and escalating trade tensions posing downside risks.

It said that even as the past rate cuts were being gradually transmitted to the real economy, the benign inflation outlook provided headroom for policy action to close the negative output gap.

This is the fourth consecutive time that the RBI has reduced repo rate. In the earlier three policies, it has reduced repo rate by 25 basis points each.