RBI cuts repo rate by 25 bps to 7.5%
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- Business & Industry
- Tuesday, 19 March 2013 14:45
- Published on Tuesday, 19 March 2013 14:45
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Gujarat Global News Network, New Delhi
In its mid-quarter policy review, the Reserve Bank of India lowered repo rate to 7.50 percent. Accordingly, the reverse repo rate stands at 6.50 percent.
The repo rate is the rate at which banks borrow short-term money from the central bank. Banks place excess money with RBI through reverse repo rate.
The 25 basis points cut is the second this year. The central bank left the cash reserve ratio for banks unchanged at 4.00 percent. The marginal standing facility (MSF) rate and the Bank Rate are both 8.5 percent.
“Even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited," the Reserve Bank of India said in its mid-quarter monetary policy review, putting to rest any hopes for further rate cuts by the central bank.
The rate cut is aimed at boosting the sagging economy, which is expected to grow at 5% in the current fiscal, the slowest pace in a decade. Economic growth slowed to 4.5% in the December quarter from 5.3% in the preceding quarter.
“Notwithstanding moderation in non-food manufactured products inflation, headline inflation is expected to be range-bound around current levels over 2013-14 in view of sectoral demand-supply imbalances, the ongoing corrections in administered prices and their second-round effects,” RBI said.
“In addition, elevated food prices, including pressures stemming from MSP (minimum support prices) increases, and the wedge between wholesale and retail inflation have adverse implications for inflation expectations,” RBI said.
State Bank of India, the country’s largest public sector bank said that there is no chance of reduction in lending rates following the cut in rates by the RBI. “A repo rate cut doesn’t mean much for the banking system, as it will not bring down our cost. Any significant cut in lending rates is unlikely,” said Pratip Chaudhuri, chairman of State Bank of India.
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