RBI has cut repo rate by 25 bps to 5.15 percent. What does this mean for you? Is this the right time to take a loan? Latha Venkatesh explains.
Highlights of the RBI policy statement
* The Monetary Policy Committee cut the repo rate by 25 basis points to 5.15 percent, with a 5:1 vote. The reverse repo rate was reduced to 4.9 percent.
* Chetan Ghate, Pami Dua, Michael Patra, Bibhu Kanungo and Shaktikanta Das voted for 25 bps cut. Ravindra Dholakia voted for a 40 bps cut.
* All six MPC members voted in favour of a rate cut and for retaining the accommodative stance.
* The RBI lowered its GDP growth projection for FY20 to 6.1 percent from 6.9 percent earlier. Q2 GDP estimated to be at 5.3 percent, 6.6 percent in Q3, 7.2 percent in Q4. The GDP growth is likely to be 7 percent in FY21.
* The RBI’s industrial outlook survey shows muted expansion in demand conditions in Q3. Export prospects have been impacted by slowing global growth and continuing trade tensions.
* On the positive side, the impact of monetary policy easing and several measures announced by the government over the last two months are expected to revive sentiment and spur domestic demand.
* The RBI has also revised slightly upwards the retail inflation projection to 3.4 percent for Q2FY20. It retained inflation projections at 3.5-3.7 percent for H2FY20 and 3.6 percent for Q1FY21.
* Volatile crude oil prices and the persisting geo-political uncertainties pose some upside risks to the inflation outlook.
* The RBI meeting minutes will be published by October 18.*
The next RBI monetary policy meeting is scheduled during December 3-5.