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RBI monetary policy: Here are the key highlights from the MPC meeting

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The Reserve Bank of India's monetary policy committee (MPC) on Thursday announced a rate cut of 25 basis points (bps) and changed the stance to 'accommodative' from 'neutral'. The policy announcement came after the  MPC concluded its second bi-monthly meeting for current fiscal year.

RBI monetary policy: Here are the key highlights from the MPC meeting
The Reserve Bank of India's monetary policy committee (MPC) on Thursday announced a rate cut of 25 basis points (bps) and changed the stance to 'accommodative' from 'neutral'. The policy announcement came after the  MPC concluded its second bi-monthly meeting for current fiscal year. One basis point is one-hundredth of one percentage point.
After the announcement,  the RBI repo rate, the key interest rate at which the central bank lends to the banks, stands at 5.75 percent. The reverse repo rate - the rate at which the central bank borrows from commercial banks - stands at 5.50 percent.
The MPC, which takes the decision on the key interest rates, has six members, three of whom are members of the RBI, while the rest are appointed by the government of India.
The board members include RBI governor Shaktikanta Das, RBI deputy governor Viral Acharya, executive director Michael Debabrata Patra, IIM Ahmedabad professor Ravindra H Dholakia, Delhi School of Economics director Pami Dua and Indian Statistical Institute Professor Chetan Ghate.
Highlights of the monetary policy
  • Repo rate slipped below 6 percent for the first time since September 2010. It slipped to the lowest level since July 2010.
  • All the six members unanimously backed a rate cut and were in favour of maintaining an accommodative stance.
  • GDP growth projection for FY20 has been revised downwards from 7.2 percent in the April policy to 7 percent.
  • The H1FY20 GDP growth forecast has been cut to 6.4-6.7 percent from 6.8-7.1 percent while the H2FY20 GDP growth forecast is revised to 7.2-7.5 percent from 7.3-7.4 percent.
  • The RBI said there is scope for the MPC to accommodate growth concerns by supporting efforts to boost aggregate demand and reinvigorate private investment activity.
  • For the first half of FY20, the RBI raised the inflation target to 3-3.1 percent from 2.9-3 percent and for the second half, revised to 3.4-3.7 percent from 3.5-3.8 percent.
  • The decision made on inflation is in consonance with the objective of achieving the medium-term target for consumer price index inflation of 4 percent within a band of +/- 2 percent while supporting growth.
  • There is scope for the MPC to accommodate growth concerns by supporting efforts to boost aggregate demand and reinvigorate private investment activity while remaining consistent with its flexible inflation targeting mandate.
  • Risks to inflation projection are from uncertainties relating to the monsoon, unseasonal spikes in vegetable price, international fuel prices and their pass-through to domestic prices. Other risks include geo-political tensions, financial market volatility, and fiscal scenario.
  • The central bank announced that it would conduct an Open Market Operation purchase auction of Rs 15,000 crore on June 13, 2019.
  • The RBI removed charges levied by it on RTGS and NEFT transactions and asked banks to pass on the benefits to customers. The central bank also said it would set up a committee to review the charges levied on the use to ATMs as the usage by the public has been growing significantly.
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