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economy | Feb 7, 2019 12:35 PM IST

RBI monetary policy: Here's why governor Shaktikanta Das cut repo rate today

By CNBC-TV18 | Feb 8, 2019 6:12 AM IST (Updated)

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The Reserve Bank of India (RBI) on Thursday released its sixth bi-monthly statement for 2018-19. The central bank cut the repo rate by 25 basis points to 6.25 percent and changed its monetary policy stance to “neutral” from “calibrated tightening”.

The Reserve Bank of India (RBI) on Thursday released its sixth bi-monthly statement for 2018-19.

The central bank cut the repo rate by 25 basis points to 6.25 percent and changed its monetary policy stance to “neutral” from “calibrated tightening”.

Here are the key reasons behind the RBI's rate cut decision:

According to the RBI governor Shaktikanta Das, one of the key reason behind the cut was the fall in the export growth in the last quarter. "Export growth was almost flat while import growth turned negative in December 2018," Das said.

Fall in the inflation trend has also prompted to this move. As per the governor, path of inflation has moved downwards significantly.

The need to strengthen the credit flow through banks also prompted the rate cut. While bank credit flows have picked up, they are yet to become broad based. It is expected that this will change once the new rate cut will lead to loans getting cheaper.

India's forex reserves were at $ 400.2 billion as of 1^st February. This is a significant rise and supports the claims made by the government that the reserves are booming.

Another reason that the RBI governor pointed out was the need to strengthen private investment activity in the country.

First Published: Feb 7, 2019 12:35 PM IST

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