India CB cuts rates By 25 basis points


Consequently, the reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25%.

India's central bank yesterday cut interest rates for the first time in nearly a year amid sluggish growth and record-low inflation in the world's fastest growing economy.

Retail inflation for June came in at 1.54 percent, down from 2.18 percent in May and the lowest since the government started tracking it in 2012. The June data was the first time the lower end of that band has been breached, experts said.

Mumbai: The markets were largely unmoved by the Reserve Bank of India (RBI) repo rate cut on Wednesday, as analysts said the move was on expected lines. Rates are set by a six-member committee at the central bank.

"These factors... opened up some space for monetary policy accommodation", he told reporters.

Motilal Oswal, CMD, Motilal Oswal Financial Services, said the RBI's decision is an "almost a copy book event where street expected 25 bps and RBI Governor delivered 25 bps cut on the policy front".

The meeting also comes in the backdrop of a cut in savings deposits by State Bank of India from 4 to 3.5 percent in the wake of rising deposits following demonetisation.

It should also be seen as an indicator of expectations of consistent fall in inflation that could lead to a fall in lending rates in the near future. Assocham said that even though the 25 bps cut "may not make much of a difference" to the debt servicing burden of the borrowers, especially the over-leveraged corporates, "it certainly improves the sentiment".

Economists were widely split about whether the RBI would cut rates again. The government welcomed the move and called it "an important step necessary to converge toward the appropriate real monetary conditions for sustained growth consistent with India's potential and for stable, moderate inflation".