RBI reduces repo rate by 25 basis points to 5.75%

New Delhi, June 6 (KNN) The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 5.75 percent from 6.0 per cent with immediate effect for third time in a row.

The six-member MPC, headed by RBI Governor Shaktikanta Das unanimously decided to reduce the policy repo rate by 25 basis and change the stance of monetary policy from neutral to accommodative.

The MPC also decided to change the stance of monetary policy from neutral to accommodative. The RBI had retained its "neutral" stance after the rate cut in April but now it has changed its stance to "accommodative"

Repo rate is the interest rate at which the RBI lends money to banks.

Commenting on this, CEO of Epic Research, Mustafa Nadeem, said “RBI has cut the rate as per expectations on the street. The 25 BPS repo rate cut bringing it down to 5.75% and reverse repo now down to 5.5% and MSF and bank rate to 6%.”

The stance which was neutral is now shifted to accommodate given the ongoing global trade tensions, currency devaluations in emerging economies. This is a welcome move for the market which was widely expected, he added.

He asserted “The RBI is now keen on looking to improve growth trajectory since the ongoing liquidity crisis has hurt the cost of borrowings, and further stressed the system. The distress in rural demand and near-monsoon prediction has also put some stress since it can push inflation a bit higher.”

The trajectory stated by RBI is at 3 - 3.1%. The accommodative stance is now focused on the liquidity and concerns over it. The cost of borrowing is now one concern that needs to be stressed and banks would /should likely to pass the benefit to end consumer. RBI has also put a stance further that it may take necessary actions that will help to keep financial stability, Nadeem added.