RBI cuts repo rate for third time in a row this year; other highlights of central bank's monetary policy statement

Slashing benchmark lending rates for the third time this year, the Reserve Bank of India cut its repo rate by 0.25 percent on Thursday and said its future monetary policy stance will be more accommodative.Amid concerns of a slow down in the economy, the central bank lowered its gross domestic product (GDP) forecast to 7 percent for the current fiscal from 7.2 percent projected earlier.The repo rate, at which the central bank lends to the system, will come down to 5.75 percent after the cut.While marginally increasing its inflation projection to 3-3.1 percent for the first half of the fiscal year 2019-20, which is within the comfort range of 2-6 percent set by the government, RBI cut the GDP growth targets sharply to 7 percent for FY20 on the weak global scenario and dip in private consumption.[caption id="attachment_4499583" align="alignleft" width="380"]

Representational image. Reuters.[/caption]"The MPC (monetary policy committee) notes that growth impulses have weakened significantly… A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," read the policy resolution.Here are the highlights of RBI's monetary policy statement:

• Repo rate reduced by 25 bps to 5.75 percent for third time in a row
• Reverse repo rate now stands at 5.50 percent, marginal standing facility (MSF) rate 6 percent
• RBI changes policy stance to accommodative from neutral
• Cuts GDP growth forecast to 7pc from 7.2 percent for FY20
• Raises retail inflation forecast for Apr-Sept to 3-3.1 percent and 3.4-3.7 percent in October-March
• Projects upward bias in food inflation in near term due to rising prices of food items
• Forecast risks to inflation trajectory from monsoon uncertainties, unseasonal spike in vegetable prices, crude oil prices, financial market volatility and fiscal scenario
• Waives RTGS and NEFT charges to promote digital transactions
• Sets up a panel to review ATM charges, fees levied by banks
• To issue draft guidelines for 'on tap' licensing of small finance banks by August
• Flags sharp slowdown in investments, moderation in private consumption growth as concern
• All six MPC members voted in favour of 0.25 percent policy rate cut
• Average daily surplus liquidity in the system at Rs 66,000 crore in early June
• Foreign Exchange Reserves stood at $421.9 billion on 31 May, 2019
• Next monetary policy statement on 7 August

(With PTI inputs)