The Reserve Bank of India has slashed the policy repo rate under the liquidity adjustment facility by 25 basis points to 5.15% from 5.40% with immediate effect.

Why India’s Central Bank Slashed Repo Rate By 25 Basis Points?
Why India’s Central Bank Slashed Repo Rate By 25 Basis Points?

India’s central Bank the Reserve Bank Of India (RBI) on 4th of October slashed the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.15% from 5.40% with immediate effect.

Consequently, the reverse repo rate under the LAF stands reduced to 4.90%, and the marginal standing facility (MSF) rate and the Bank Rate to 5.40%.

The RBI in its Fourth Bi-monthly Monetary Policy statement stated, on the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting decided to:

  • Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.15 per cent from 5.40 per cent with immediate effect.

Consequently, the reverse repo rate under the LAF stands reduced to 4.90 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 5.40 per cent.

  • The MPC also decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

Why RBI slashed repo rate?

The India’s Central Bank said that 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.