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RBI Breaks-Away From Convention; Cuts Key Lending Rate By 35 Bps

Written by : Info Box Team
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The Reserve Bank of India on Wednesday broke-away from convention to reduce key lending rates by 35 basis points to 5.40 per cent. Historically, the central bank has been either reducing or increasing rates in the multiples of 25 basis points.

Acknowledging the change, RBI Governor Shaktikanta Das answering a question in the post policy press interaction, defended the decision to reduce the rate to 35 basis points and stated that there is nothing "sacrosanct" in maneuvering the policy in the multiples of 25 basis points.

Das added that that MPC found 35 basis points as sufficient for the time period. On Wednesday, the RBI's monetary policy committee (MPC) in its third policy review of the current fiscal reduced the repo, or short term lending rate for commercial banks, by 35 basis points to 5.40 per cent from 5.75 per cent.

Consequently, the reverse repo rate was revised to 5.15 per cent, and the marginal standing facility (MSF) rate and the bank rate to 5.65 per cent. Besides, the MPC maintained its accommodative stance of monetary policy.