For those unversed, repo rate is the rate at which the RBI lends money to commercial banks
RBI Governor Shaktikanta Das announced the decision to cut repo rate this year to 5.4 per cent. Pic/AFP
The Reserve Bank of India (RBI) on Wednesday cut repo rate for the fourth consecutive time this calendar year to 5.4 per cent from the current 5.75 per cent amid low inflation, faltering economic growth and uncertain global scenario.
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The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das announced the decision after a three-day meeting. On February 7, April 4 and June 6, the central bank had reduced the key lending rate by 25 basis points each time to infuse liquidity and push growth.
What is repo rate
Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans and lowers equal monthly instalments on home loans, car loans and personal loans.
Watch the press conference of the third bi-monthly policy review by the Monetary Policy Committee (MPC)
— ReserveBankOfIndia (@RBI) August 7, 2019
India's economy grew by only 6.8 per cent in 2018-19, according to government data. In the fourth quarter (January to March), the growth dipped to 5.8 per cent, marking a five-year low.
Retail inflation at 3.18 per cent in June has remained below the RBI's medium-term target of 4 per cent for almost a year.
Industry leaders say a substantial cut in the repo rate and bank lending rates are needed to boost manufacturing and domestic demand for economic growth.
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