RBI Cut in Repo Rate from 6.75 Percent to 6.50 Percent

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RBI Cut in Repo Rate from 6.75 Percent to 6.50 Percent. RBI cuts repo rate by 25 bps to 6.50%, Here we are providing Latest News for Cut in Repo Rate. Read Full News From Below

The Reserve Bank of India (RBI) has cut the Repo Rate recently. It has reduced the Repo Rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) from 6.75 per cent to 6.50 per cent on Wednesday April 5, 2016.

The repo rate now stands at 6.5%, the lowest it has been since March 2011. However, it reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 95% of the requirement to 90% with effect from the fortnight beginning April 16, 2016.

Reserve Bank Governor Raghuram Rajan on Wednesday announced a surprise repo rate cut, his second in less than two months. Repo rate has been reduced by 25 basis points or 0.25 per cent to 6.50 per cent with immediate effect.

New Rates RBI

New Rate Percentage
Repo Rate 6.50%
Reverse Repo Rate 6.00%
CRR 4.00%
Daily CRR 90%
SLR 21.5%

The repo rate cut comes days after Finance Minister Arun Jaitley’s Union Budget announcement. In his Budget, Mr Jaitley had loosened the reins on public spending to drive growth, but promised lower-than-expected borrowing despite raising the fiscal deficit target.

Mr Jaitley’s balancing act seems to have gone down well with Dr Rajan. In a statement, he said, “The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative.”

Mr. Rajan had last cut the key rates at the September 2015 review by a surprising 0.50 per cent, stating that the RBI is “frontloading” through the measure but affirmed that the central banks continues to hold the accommodative stance.

At 5.18 per cent for February, the headline inflation was trending lower than expectation, making it easier for the RBI to achieve its goals.

The government’s affirmation of sticking to the fiscal consolidation path in the budget by promising to bring down the fiscal deficit to 3.5 per cent in the current fiscal, and also a reduction in the small savings rates flagged by RBI in earlier policy announcements only bolstered the demands for the cut.

Repeated contraction in the factory output, which came in at a negative 1.5 per cent in January, had also upped the demands for the growth-boosting measure of a cut in the key policy rates.

With the liquidity being tight in the recent months, there were expectations of measures on this front.

On the regulatory side, RBI said it is mulling a regime where large borrowers (which account for a bulk of the NPAs) shall be mandated to go to the market for a part of their funding rather than relying on banks completely.

RBI also proposed to redefine bank branches and permissible methods of outreach. It will also issue a discussion paper to go ahead on the differentiated banking and look into the introduction of custodian banks and wholesale banks, the policy document said.

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