The Reserve Bank of India (RBI) today, reduced the repo rate by 25 basis points. The new repo rate stands at 6.00% from the earlier 6.25%. This is the second consecutive rate cut this year by the Monetary Policy Committee (MPC) of the RBI.

The repo rate is the rate at which the RBI lends to commercial banks in the event of shortfall of funds. The RBI uses repo rate to determine or regulate the rate of money supply, level of inflation and liquidity in our country. 

As per its official press release, the RBI stated, “On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.0 per cent from 6.25 per cent with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent.”

The MPC also decided to maintain a neutral monetary policy stance. As per the press release, “These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.”

This is the last meeting of the MPC before the forthcoming Lok Sabha elections in April-May 2019. The next meeting of the MPC is scheduled between 3-6 June, 2019.