Janjivan Bureau / Mumbai : The Reserve Bank of India (RBI) on Thursday lowered interest rates to a nine-year low in order give a boost to a slowing economy. The central bank’s Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, took an unanimous decision to lower the repo rate by 25 basis points or 0.25 per cent to 5.75 per cent.The repo is the rate at which the Central Bank lends to commercial banks.
The reverse repo, or the rate at which the central bank borrows from the commercial banks, was also lowered to 5.5 per cent.
Speaking to reporters after the announcement of the policy review, Das urged the banks to pass on the rate cuts to borrowers. The Central Bank hoped that lending institutions would reduce equated monthly instalments (EMI) for home loans, car loans and other loans.
The governor later added that the six-member committee changed the Central Bank’s policy stance to “accommodative” from “neutral”. The MPC in its commentary said it projected India’s economic growth at 7 per cent, lower than the 7.2 per cent projection made in April.
“Global economic activity has been losing pace after a somewhat improved performance in Q1, reflecting further slowdown in trade and manufacturing activity,” the committee’s statement said.
The MPC also raised the forecast for retail inflation marginally to 3 per cent to 3.1 per cent for April-September 2019 as against its previous forecast of 2.9 per cent to 3.0 per cent. In his customary press conference, Das dwelt on a number of concerns regarding the financial sector.
He said the RBI was closely monitoring the developments in the Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFCs) sectors, which are reeling under the troubles faced by DHFL.
“We have been closely monitoring the performance and developments in the NBFC and HFC sectors,” Das said. He added that the central bank was committed to a strong NBFC sector.
“The RBI will not hesitate to take any measure to ensure financial stability in the sector,” Das said.
The governor said the Central Bank would not levy charges on transactions routed through the RTGS and NEFT systems for fund transfers.
“In order to provide an incentive to digital funds movement, it has been decided to do away with the charges levied by the RBI for transactions processed in the RTGS and NEFT systems,” Das said.
