The RBI, in its bi-monthly policy review today, trimmed the repo rate by 35bps to 5.4% with stance maintained as accomodative.

Reverse repo rate at 5.15%. Marginal standing facility (MSF) and bank rate adjusted to 5.65%.

The market largely anticipated a rate cut of 25bps.

Key Highlights:

  • RBI has been taking steps to enhance credit to NBFCs.
  • Real GDP growth forecast cut to 6.9% for FY20.
  • April-June 2020 CPI estimated at 3.6%.
  • The rate cut is owing to downside risks to economic growth, as per RBI.
  • This is the fourth consecutive rate cut since Feb 2019.
  • The apex bank has decided to raise banks’ exposure limit to a single NBFC to 20% of Tier-I capital of the bank.
  • Four MPC members (Ravindra H. Dholakia, Michael Debabrata Patra, Bibhu Prasad Kanungo and Shaktikanta Das) voted to reduce the policy repo rate by 35bps, while two members (Chetan Ghate and Pami Dua) voted to reduce the policy repo rate by 25bps.
  • RBI says various high frequency indicators suggest weakening of both domestic and external demand conditions.