The Reserve Bank of India (RBI), Monetary Policy Committee (MPC), in its second bi-monthly policy review for this financial year has cut the repo rate, the rate at which it lends to banks, by 25 basis points from 6 percent to 5.75 percent.
The MPC which is headed by RBI Governor Shaktikanta Das also changed policy stance to accommodative from neutral.
This is the first rate cut by the central bank under the new Prime Minister Narendra Modi led NDA government.
The reverse repo rate and bank rate have been adjusted to 5.50 and 6.0 percent respectively. The Gross Domestic Product (GDP) has also been adjusted to 7 percent from 7.2 percent in earlier projection.
The inflation has also been fixed at 3.0-3.1 percent in the first half of 2019-20 and 3.4-3.7 percent in the second half of the year.
This was a third rate cut in a row by the Central bank.
All the six members voted in favor of a 25 bps rate cut, said the RBI in a press statement.
The committee has also kept the cash reserve ratio (CRR) unchanged at 4 percent.
The MPC noted that the growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April policy.
“A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. The headline inflation trajectory remains below the target mandated to the MPC even after considering the expected transmission of the past two policy rate cuts,” MPC said in its statement.