RBI cuts interest rate by 50 bps in surprise move today

In a surprise move, the Reserve Bank of India cut the repo rate, its short-term lending rate to banks, by 50 bps, to 6.75% with immediate effect today during its monetary policy review meet. At the same time it has cut reverse repo by 50 bps to 5.75% while kept the Cash Reserve Ratio unchanged at 4%. Marginal Standing Facility Rate and Bank Rate stood at 7.75% while Statutory Liquidity Ratio has been kept unchanged at 21.5%.

RBI Governor Raghuram Rajan said inflation is expected to touch 5.8% in January 2016, which is lower compared to earlier August projection. RBI has cut its GDP growth forecast for current financial year to 7.4% compared to its earlier forecast of 7.6%. aSome major banks including SBI also followed RBI with cut in their lending rates which will make home and car loans cheaper for consumers. Also this rate cut should help to boost both economic and industrial growth.