The Reserve Bank of India (RBI) on Thursday cut its repo rate or the rate at which it lends to banks, by 25 basis points to 6 per cent bringing interest rate to the lowest level in one year on softening inflation.
This is the second consecutive rate cut from RBI under new chief Shaktikanta Das, after a surprise rate cut in February.
The central bank, however, kept monetary policy stance at ‘neutral’.
In the second policy review under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut.
The benchmark interest rate was cut by 0.25 per cent to 6 per cent, a move that will result in lower cost of borrowing for the banks that are expected to transmit the same to individuals and corporates.
The RBI had on February 7, in its sixth bi-monthly policy statement for 2018-19, reduced the repo rate by 25 basis points from 6.5 per cent to 6.25 points.
The apex bank had also changed the policy stance to “neutral” from existing “calibrated tightening”.
Earlier, the Monetary Policy Committee had changed its stance to calibrated tightening in the meeting held in October 2018.
Last time the repo rate stood at 6 per cent was in April 2018.
The rate cut is in consonance of achieving the medium-term objective of maintaining inflation at the 4 per cent level while supporting growth, RBI said in a statement.