Reserve Bank of India in its bi-monthly monetary policy has reduced repo rate by 25 basis points to 6.25%. RBI’s six-member monetary policy committee also brought down a reverse repo rate to 6%.
The repo rate is the rate at which the Reserve Bank lends short-term money to the banks, while the reserve repo rate is the rate at which the central bank borrows money from commercial banks.
It was the first policy review by the RBI after the appointment of its governor Shaktikanta Das in December last year.
RBI governor Das said that inflation had fallen to an 18-month low of 2.19% in December and was expected to remain in the range of 3.2 – 3.4% in April – September which is lower than previous RBI prediction of 3.8 – 4.2%range.
The RBI governor said that they expect GDP growth rate to be at 7.4% in fiscal 2019-20 which is up from 7.2% estimated for the financial year 2018-19 by the central statistical organization.