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RBI slashes repo rate by 25 bps
02 Jun '15
2 min read
In its second bi-monthly policy statement for the new fiscal, the Reserve Bank of India slashed repo rates by 25 bps to 7.25 per cent while keeping CRR and SLR rates unchanged at 4 per cent and 21.5 per cent, respectively.
This is the third time the RBI has axed repo rates this year. Justifying the premise for this cut, RBI Governor Raghuram Rajan said "Banks have started passing through some of the past rate cuts into their lending rates, headline inflation has evolved along the projected path, the impact of unseasonal rains has been moderate so far, administered price increases remain muted, and the timing of normalisation of US monetary policy seems to have been pushed back. With low domestic capacity utilization, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today.”
The reduction in the repo rate will lower cost of funds for banks and is a signal to them to reduce lending rates. Rajan said the economic recovery was still slow but there were scope for further cuts if the monsoon was better than expected or if government took measures to offset impact of monsoon.
The third bi-monthly monetary policy statement will be announced on August 4, 2015.
The Tirupur exporters association (TEA) has welcomed the RBI’s decision to cut the repo rate. In a press statement, TEA president Dr A Sakthivel said he welcomed the RBI announcement to reduce the repo rate by 0.25 per cent. He said the interest rate cut would be helpful to quote competitive rate and sustain in the global market only when the banks pass on the measures to the SME units and exporting units. (SH)
This is the third time the RBI has axed repo rates this year. Justifying the premise for this cut, RBI Governor Raghuram Rajan said "Banks have started passing through some of the past rate cuts into their lending rates, headline inflation has evolved along the projected path, the impact of unseasonal rains has been moderate so far, administered price increases remain muted, and the timing of normalisation of US monetary policy seems to have been pushed back. With low domestic capacity utilization, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today.”
The reduction in the repo rate will lower cost of funds for banks and is a signal to them to reduce lending rates. Rajan said the economic recovery was still slow but there were scope for further cuts if the monsoon was better than expected or if government took measures to offset impact of monsoon.
The third bi-monthly monetary policy statement will be announced on August 4, 2015.
The Tirupur exporters association (TEA) has welcomed the RBI’s decision to cut the repo rate. In a press statement, TEA president Dr A Sakthivel said he welcomed the RBI announcement to reduce the repo rate by 0.25 per cent. He said the interest rate cut would be helpful to quote competitive rate and sustain in the global market only when the banks pass on the measures to the SME units and exporting units. (SH)
Fibre2fashion News Desk – India
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