Reserve Bank cuts repo rate by 25 bps

The banking regulator has cut repo rate to 5.75 with the announcement of a 25 basis point cut in its second bimonthly review meeting, on Thursday. Markets recovered as the rate cut was in-line with market expectations.

With this rate cut, RBI has given three rate cuts in row. RBI has also revised its policy stance from neutral to accommodative. However, the Reserve Bank Governor Shaktikanta Das
has warned that the growth impulses have weakened significantly.

The Monetary Policy Committee (MPC) unanimously voted in favour of the rate cut. The reverse repo rate is a 5.50 per cent and the GDP forecast for FY20 is at 7 per cent. RBI has kept the cash reserve ratio (CRR) unchanged at 4 per cent.

The central bank has sets the minimum leverage ratio for systemically important banks at 4 per cent and 3.5 per cent for all other banks.

Reacting to the development, the markets recovered. At 12:05 hours, the BSE Sensex was at 39,936.24, down by 147.30 points or 0.37 per cent. While Nifty50 was trading at 11,968.90, down by 52.75 points or 0.44 per cent. Nifty Bank was quoting 31,353.45, down by 235.60 points or 0.75 per cent, on Thursday.