RBI MPC Starts Discussions On Monetary Policy Review
RBI Governor Shaktikanta Das (Photograph: PTI)

RBI MPC Starts Discussions On Monetary Policy Review

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The Monetary Policy Committee headed by the Reserve Bank of India Governor Shaktikanta Das started deliberations on the second bi-monthly policy review of the current fiscal, amid expectations of a 25 basis points cut in lending rate to boost the slowing economy.

The central bank has slashed the short-term lending rate (repo rate) by 25 basis points (0.25 percentage points) each in its last two policy reviews.

"The Monetary Policy Committee will meet during June 3, 4 and 6 for the second bi-monthly Monetary Policy Statement for 2019-20. The resolution of the MPC will be placed on the website at 11:45 a.m. on June 6," the RBI said.

The upcoming policy review will be the central lender’s first after the results of 2019 Lok Sabha elections.

Uday Kotak, Managing Director of Kotak Mahindra Bank said the RBI should reduce rates in view of the slowing economy, but the real challenge is to ensure transmission across deposit and lending rate.

Also read: India Assets Buck Asia Losses as Weaker GDP Spurs Rate-Cut Bets

"RBI has the ability to reduce interest rates and the pace and quantum is something that we can debate. We are still in a position to reduce interest rate from where they are," he said.

Experts believe that since inflation is well within the comfort zone, the RBI should consider rate cut to give impetus to economic activities.

On expectations from the MPC, CII Director General Chandrajit Banerjee in a statement said the RBI needs to continue lowering interest rates in order to provide a stimulus to the economy.

"This is needed to address the slowdown in production and sales across consumer goods categories including segments such as passenger cars, two-wheelers as well as non-durables," he said, adding that with inflation still far below RBI's target of 4 per cent, there is an ample room for reduction in the policy rate.

The State Bank of India in a recent research report said the RBI needs to go in for a larger rate cut —more than 25 basis points — to reverse the current slowdown in the economy.

India's GDP growth slowed to a five-year low of 5.8 percent in the fourth quarter of 2018-19 mainly due to poor performance of agriculture and manufacturing sectors.

Also read: The GDP Fine Print And What It Says About India’s Policy Options

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