RBI cuts repo rate by 0.25% to boost growth; home, auto loan to come down
Mumbai, Oct 4: The Reserve Bank on Friday cut its benchmark lending rate by 0.25 per cent to revive growth that has hit six-year low of 5 per cent, and affirmed commitment to remain accommodative to address growth concerns 'as long as necessary'.
With this cut, repo rate, at which it lends to the system, will now come down to 5.15 per cent and push consumption during the ongoing festival season.
This will help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.
This is the fifth straight cut in rates by the Reserve Bank of India in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.
In the fourth bi-monthly review of the policy, the RBI sharply reduced its GDP growth estimate to 6.1 per cent for FY20 as against 6.9 per cent it was expecting earlier.
This cut came in the wake of June quarter growth slipping to six year low of 5 per cent, which is attributed to a slowdown in consumption, lack of new investments by the industry and also a slump in global economy.
"...the MPC (monetary policy committee) decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target," the resolution of the six-member panel headed by RBI Governor Shaktikanta Das said.
All the six members voted for a rate cut at the end of the three-day meeting, with Ravindra Dholakia voting for a 0.40 per cent reduction in rates.
On inflation, which is the key mandate of the RBI with the target of 4 per cent in the medium term, the MPC moved up the September quarter expectations "slightly upwards" to 3.6 per cent, but retained its projection for the second half of this fiscal at 3.5-3.7 per cent.
The half-yearly Monetary Policy Report presented along with the policy review suggested that inflation will remain within the target levels till early part of FY21.
On reviving growth, the MPC welcomed the recent moves by the government as the ones in right direction, but the resolution did not have any reference to fiscal deficit or fiscal management, which is generally deemed to have an inflationary impact.
"Several measures announced by the Government over the last two months are expected to revive sentiment and spur domestic demand, especially private consumption," it said.
Risks on the 6.1 per cent GDP growth estimate are "evenly balanced", it said.
On the farm sector, the MPC resolution said, "prospects of agriculture have brightened considerably, positioning it favourably for regenerating employment and income, and the revival of domestic demand".
The RBI also noted that the monetary policy transmission of the past actions has been "staggered and incomplete", and said that as against the cumulative reduction of 1.10 per cent, banks have passed on only 0.29 per cent to the borrowers, if we were to go by the weighted average lending rate.
Given the concerns on growth and inflation remaining within the target levels, a majority of analysts were expecting the RBI to cut rates at the review.
Despite the surge in the onion prices, the headline inflation for August had come at 3.8 per cent leading to expectations of a rate cut. Das had also recently said the prospect of benign inflation during the remainder of FY20 gives it the room to cut rates.
As the RBI has compelled banks to align all their retail loans to external benchmarks, and a majority of lenders have adopted the repo rate as the benchmark, the cut will likely bring cheer to borrowers.
On the regulation and supervision front, the RBI decided to increase the household limits for micro-lenders' borrowers, and also raise the cap to Rs 1.25 lakh per eligible borrower from the previous Rs 1 lakh.
Let the Truth be known. If you read VB and like VB, please be a VB Supporter and Help us deliver the Truth to one and all.
‘Self-styled Vishwaguru stands exposed’: Cong's dig at PM over Pak role in US-Iran ceasefire
New Delhi (PTI): Taking a swipe at the government, the Congress on Wednesday said the role played by Pakistan in bringing about the ceasefire between the US and Iran is a “severe setback” to Prime Minister Narendra Modi's “highly personalised diplomacy” and “the self-styled Vishwaguru stands thoroughly exposed”.
The opposition party also said Prime Minister Modi's “cowardice is demonstrated by his silence not only on Israel’s belligerence, but on the completely unacceptable and disgraceful language being used by his good friend in the White House”.
Congress general secretary in-charge communications Jairam Ramesh said the entire world will cautiously welcome the two-week ceasefire in the West Asia conflict between the US and Israel on the one side and Iran on the other.
“The conflict had begun on February 28th with the targeted assassinations of the topmost echelons of the regime in Iran. These had started just two days after Prime Minister Modi had completed his much-trumpeted visit to Israel, a visit that diminished India’s global stature and standing,” Ramesh claimed.
PM Modi had said nothing about Israel’s "genocide" in Gaza and its aggressively expansionist policies in the occupied West Bank, Ramesh said.
“The role played by Pakistan in bringing about the ceasefire is a severe setback to both the substance and style of Mr Modi’s highly personalised diplomacy,” he said.
The policy to isolate Pakistan for its continuing support to terrorism in Jammu and Kashmir and to convince the world that it is a failed state has clearly not succeeded – unlike what Manmohan Singh had accomplished after the Mumbai terror attacks, Ramesh claimed.
That a bankrupt economy dependent entirely on the largesse of external donors and a broken country in so many ways was able to play such a role calls into question Modi’s strategy of engagement and narrative management, he said.
“He (Modi) or his team has also never explained why Op Sindoor was suddenly and abruptly halted on May 10th 2025 - the first announcement of which came from the US Secretary of State and for which the US President has claimed credit almost a hundred times since then,” the Congress leader said.
“There is a palpable sigh of relief everywhere. The External Affairs Minister (S Jaishankar) dismissed Pakistan as a dalal. But now the self-styled Vishwaguru stands thoroughly exposed, his self-declared 56-inch chest shrunk and shrivelled,” Ramesh said.
“His cowardice is demonstrated by his silence not only on Israel’s belligerence, but on the completely unacceptable and disgraceful language being used by his good friend in the White House,” the Congress leader added.
US President Donald Trump pulled back on his threats to launch devastating strikes on Iran late Tuesday, as the US and Iran agreed to a two-week ceasefire that includes the reopening of the Strait of Hormuz.
Trump swerved to de-escalate the war less than two hours before the deadline he set for Tehran to capitulate to a deal or face attacks on its bridges and power plants meant to destroy the Iranian civilisation.
Trump made the dramatic announcement on Truth Social on Tuesday evening (US time) even as Democrats called for his removal over unhinged threats to wipe out the Iranian civilisation.
"Based on conversations with Prime Minister Shehbaz Sharif and Field Marshal Asim Munir, of Pakistan, and wherein they requested that I hold off the destructive force being sent tonight to Iran, subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz," the US President said in a social media post.
Iran's Supreme National Security Council said it has accepted the ceasefire and that it would negotiate with the United States in Pakistan beginning Friday. Neither Iran nor the United States said when the ceasefire would begin, and attacks took place in Israel, Iran and across the Gulf region early Wednesday.
Israel backed the US ceasefire with Iran but the deal doesn't cover fighting against Hezbollah in Lebanon, Prime Minister Benjamin Netanyahu said early Wednesday.
