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<ul><li><keyword id="1012551" type="PERSON" weightage="20" keywordseo="RBI-cuts">RBI cuts</keyword> repo rate by 25 basis points to 5.75% from 6% in a unanimous decision.</li><li>Monetary policy stance changed to ‘accommodative’ from neutral. </li><li>RBI revised the GDP growth downwards to 7% for 2019-20 from 7.2% during the April policy rate. </li></ul> India’s central bank cut the repo rate by 25 basis points to 5.75% from 6%, in its bi-monthly policy statement today. This is the third consecutive rate cut after similar cuts in April and February this year. The monetary policy committee or MPC changed the monetary policy stance to ‘accommodative’ from neutral. “The decision to cut the rate and the change in stance is unanimous. It reflects the resolve of the MPC to act decisively and in a timely manner,” the RBI governor Shaktikanta Das said at the ongoing press conference. Higher and Faster Transmission Das also said that central banks across the world have turned accommodative. He is also confident that three rate cuts accounting to 75 basis points this year will be translate it to loans, said the Governor who delivered a hatrick after cutting rates in February and April this year. “The expectation is that the rate transmission will be higher and faster too. The effect will be seen in new consumer loans too,” Das said. The <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> also has revised the GDP growth downwards from 7.2% during the April policy rate cuts, to 7% for 2019-20. Repo rate is the rate at which RBI lends money to <keyword id="187928" type="ORGANIZATION" weightage="20" keywordseo="commercial-banks">commercial banks</keyword>. Any cut in this rate, will ease stress in the economy and increase liquidity as banks can borrow at a cheaper rate. This rate also becomes the base rate at which banks determine their own lending rates. As per expectations A lot of experts and agencies expected a 25 basis points rate cut, if not more. The stock markets have been rallying on expectations that the banks might get a lease of life, amidst many problems that they face. Yet, there are doubts whether the benefits of this rate cut will be transmitted by the banks to the borrowers. It has happened many times that the banks absorbed the rate cut advantages without passing on the benefits to the industry or the consumers. While Das took no steps to ensure that it will be transmitted, he said that 21 basis points have already been transmitted by banks. He had cut rates earlier in April and February too. “We expect RBI to spell clearly its stand on how a large cut if impacted will lead to better transmission: will the banks be now mandated for benchmarking their asset and liability moving together? Otherwise, banks will not rate cut deposit rates given the huge currency leakage,” said Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India. Is it enough? The rate cut was much expected yet is believed to fall short for a stimulus that the economy desperately needs. India’s fourth quarter GDP numbers came in at 5.8%, which was lower than expectations. Many experts have revised the growth numbers for the year downwards, and expect the pressure to continue till October. “We see further downside risks to growth as we await the reforms to begin bearing fruit in the medium term. We expect 2019-20 GDP growth to remain muted at 6.8%, with slowdown in the first half likely to continue and some improvement in consumption and investment likely in the second half,” said Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank. As per SBI’s predictions, the growth rate will stay below 6%, at least in the first half of 2019-20 and will only recover in the second half. “Global growth is fast turning out to be an Achilles’ Heel,” added Ghosh.

RBI cuts repo rate by 25 basis points; expects faster and higher transmission of benefits

<ul><li>As expected, RBI cut repo rate by 25 basis points or 0.25% </li><li>It also kept its stance as accommodative. </li><li>BSE Sensex rose 200 points in the morning anticipation of a sharp rate cut. </li></ul>Indian central bank today cut the repo rate by 25 basis points, and retained its accommodative stance. This is the fifth consecutive rate cut, brings interest rate to 5.15% at which the Reserve Bank of India (RBI) to banks. The RBI has cumulatively cut interest rates by 1.35% as of now, in multiple cuts. In the last monetary policy, it went ahead with a 35 basis point rate cut, which was unprecedented. RBI also reduced its growth rate projections for the current financial year to 6.1% from 6.9% earlier. The stock markets have been predicting a 25 basis point or higher rate cut and BSE Sensex rose 200 points in the morning in anticipation. “We pencil in a 40 bps of rate cut which should be a signal to the market that the Monetary Policy Committee is not quite done as it front loads the remaining couple of rate cuts in the cycle,” said Suvodeep Rakshit, Vice President &amp; Sr. Economist, Kotak Institutional Equities. RBI has been saying that growth will be a primary concern. In the first quarter of the financial year, the economy grew at 5% instead of the estimated 5.8-6.6% the first half. “With inflation remaining within its comfort range, despite recent onion price increases, revisions to its growth forecast warrant a sharper-than-usual rate cut in the October policy,” said Rakshit. Experts also believe that a chunky rate cut would speed up the slow transmission of rate cut benefits by banks to consumers. “The monetary policy expectation is not just limited to rate cuts. While aggregate liquidity conditions have improved, transmission remains slow. The RBI’s assessment of the same will be critical,” said a report by Edelweiss Research.

RBI cuts interest rate by 25 basis points and lowers GDP forecast to 6.1%

<ul><li>Banks have passed on only 29 basis points of rate cut benefits to customers, even as RBI eased lending rates by 100 points since February. </li><li>RBI Governor says he will take whatever steps necessary to ensure banks pass on benefits. </li><li>Das also said that the system is flush with liquidity and it will help push growth. </li></ul> The RBI governor Shaktikanta Das today said that they are willing to take whatever steps necessary to make sure banks transmit the benefits of interest rate cuts to customers. The central bank has been trying to kickstart a slowing economy by reducing the interest rates at which it lends money to banks. However, banks have been absorbing these benefits, as less is seeping through to customers. “RBI is monitoring this regularly. We have been meeting both public and private sector banks separately,” Shaktikanta Das said in a press conference. A dismal 29 for 100 Even before the central bank cut its repo rate <a href="https://www.businessinsider.in/rbi-cut-interest-rates-by-35-basis-points-as-growth-sputters-and-inflation-cools/articleshow/70565859.cms">by 35 basis points </a>today, it had eased its own lending rate by around a 100 basis points or 1%, since this February. This includes three 25 basis point cuts along with changing stance to accommodative, which adds another 25 basis point worth benefits. Yet, as per RBI’s own admission, banks have only passed on 29 basis points of the benefit to its customers. If banks do not pass on the benefits, it will not help kickstart urban and rural demand which has been slowing down, as observed with tractor and passenger car sales. ‘RBI has done its part’ Making sure banks are actively working towards growth like RBI is, is much more necessary in the current situation. The central bank reduced this year’s growth projection to 6.9% from 7%, earlier. “The RBI has done its part. We believe it is a cyclical downturn not a structural reform as of now,” said governor Shaktikanta Das, saying that there is room for structural reform. With adequate measures from the government, growth should pick up pace as the central bank believes that the second half of the year will grow at 7.3%, though the first half grew only at 5.8% As credit flow will pick up as banks go ahead and lend more at lower rates, the economic growth will start picking up, RBI believes. Das also said that the system is flush with liquidity and it will help push growth. “Banks just come out of non-performing assets (NPA) with continuous quarters of loss incurred. Some of them are turning around, and credit flow will improve and weeks and months,” Das assured. See also <a href="https://www.businessinsider.in/rbi-policy-update-home-loans-up-to-20-lakh-get-priority-status/articleshow/70567010.cms">Home loans up to ₹20 lakh may get cheaper and easier</a>

RBI is pushing India's stubborn banks to cut lending rates

<ul><li>RBI cuts repo rates by 35 basis points, higher than expectations of 25 basis point cut </li><li>The effective rate at which RBI will now lend to banks is at 5.4%. </li></ul>The Reserve Bank of India (RBI) today cut its key lending rates by 35 basis points or 0.35%, which is higher than market expectations. This the fourth consecutive repo rate cut that RBI has done, after cutting rates by 25 basis points for the last three policies. The effective rate at which RBI will now lend to banks is at 5.4%. RBI Governor Shaktikanta Das today said that they chose to cut rates by 35 basis points instead of the conventional 25 basis points as the latter might turn out to be inadequate due to current macroeconomic conditions. “The size of the rate cut should be calibrated to the dynamics of the situation. With inflation within target, addressing growth concerns especially private investment is of the highest priority,” Das said in the press conference. This will help increase credit and money supply in the market to reignite the sputtering growth engines. Das said that 50 basis points have been excessive, so 35 basis point cut is balanced. The central bank projected an inflation of 3.1% for the second quarter of 2019-20. It also cut its GDP growth estimate to 6.9% from 7% for the current financial year. Unpleasant arithmetic India’s economic growth slipped to 5.8% at the end of the March quarter, the <a href="https://www.livemint.com/news/india/core-sector-growth-flat-in-june-q1-fiscal-deficit-at-61-4-of-full-year-target-1564573772025.html">slowest quarter </a>in five years. Things have turned for the worse since then. “The month of August has always unpleasant arithmetic. Banks will cut deposit rates further and lending rates will witness a faster incremental fall in coming months. This could aid recovery, but it is unlikely before late Q3FY20,” said a report by SBI Ecowrap on the month’s RBI policy. A few experts also believed that RBI could wait and watch, though a majority expect a cut since they do not have to worry about inflation which is not high--a factor that could derail a possible cut. “The RBI may also like to wait for another two months to be sure of the inflation path before lowering rates further as it has been indicated that the RBI has so far virtually lowered rates by 100 bps – three times through the repo and once by changing the stance to accommodative,” said a report by CARE Ratings. A mountain of bad loans Banks, caught between a cash crunch and a mountain of bad loans, have not reduced lending rates despite many nudges and winks from the regulator as well as prodding from the <a href="https://www.hindustantimes.com/business-news/59-minute-loan-approval-among-steps-to-spur-growth/story-rhdDgZCulouEEoOY3PRkuM.html">Finance Minister Nirmala Sitharaman</a>. “The transmission of rate policy action has been less than satisfactory and the RBI may work on nudging banks to do so instead of lowering the rate once again,” said CARE. Non-banking financial companies or NBFCs, companies that aren’t banks but make loans, are facing liquidity crunch and the crisis is deepening. They, in turn, have stopped lending which has further slowed down the economy particularly in spaces like automobiles and real estate. Monthly auto sales, for instance, fell for the ninth straight month in July.

India's central bank cuts interest rate for the fourth time this year

<ul><li>The Reserve Bank of India has taken additional steps to bring India's shadow banks back on their feet.</li><li>In the process, some lending caps have been eased both for agriculture investment, small and medium businesses and home loans.</li><li>Home loans of up ₹20 lakhs will be considered 'priority' and these loans can be routed through non-banking financial companies (NBFCs).</li></ul>The Reserve Bank of India has cut interest rates by 35 basis points on August 7 to take advantage of the tepid inflation and revive economic growth. Aside from the broad move to reduce the policy rate, governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> also eased some lending caps to bring the country's shadow banks back on their feet. ""Rural demand in form two wheelers and tractors and the urban demand has slowed down as signalled by passenger vehicles. With measures undertaken by both the government and the RBI, we expect some recovery," Das said. The NBFCs -- firms that do not take deposits but make loans-- are an important part of the economy to ensure money flow reaches unbanked areas and to meet the demand from people who cannot avail loans from banks. Business for these NBFCs had recently come to a grinding halt after the crash of infrastructure lending giant IL&amp;FS. The spike in unpaid loans since then meant that the banks could not give the NBFCs more money to recover from the crisis. But the RBI has taken the following steps today to help them out. Overall, banks have allowed to lend 20% of their tier-1 capital to any one NBFC. The cap was so far at 15%. The regulator has also cut the risk weight for consumer loans except credit cards. This will allow banks to lend more to individual borrowers. Priority sectors A set portion of all loans by banks must be made to certain sections of the economy, at a cheaper rate, because they need the affordable loans more than others. These are called 'priority sector' loans and were routed through the banks. However, now the RBI has allowed the banks to route such loans via NBFCs too. The new limits for 'priority sector' loans are as follows: <ul><li>₹10 lakh for agricultural investments</li><li>₹20 lakh for loans to micro, small, and medium enterprises</li><li>₹20 lakh for home loans</li></ul>Simply put, if an NBFC borrows money from a bank and then lends it further to a home buyer within the ₹20 lakh threshold, it will be considered as a 'priority sector' loan. The central bank is hoping that these measure would revive demand for homes, cars and motorbikes, as well as for investment into small businesses. SEE ALSO: <a href="https://www.businessinsider.in/business/rbi-cut-interest-rates-by-35-basis-points-as-growth-sputters-and-inflation-cools/articleshow/70565859.cms" data-type="tilCustomLink" target="_blank">RBI cut interest rates by 35 basis points as growth sputters and inflation cools</a> <a href="https://www.businessinsider.in/sensex-and-nifty-react-little-to-rbi-decision-to-cut-interest-rate/articleshow/70566279.cms" data-type="tilCustomLink" target="_blank">Here's why Indian markets aren't excited by the RBI move to cut interest rates</a>

Home loans up to ₹20 lakh may get cheaper and easier

It's time for RBI to do 'whatever it takes' to save India's imploding financial sector, says Vallabh Bhanshali

It is true that <a href="http://www.businessinsider.in/searchresult.cms?query=raghuram+rajan">RBI Governor Raghuram Rajan</a> exceeded expectations by <a href="http://www.businessinsider.in/BREAKING-NEWS-RBI-cuts-repo-rates-by-50-basis-points-CRR-unchanged/articleshow/49148486.cms">announcing key rate cut by 50 basis points</a>. 
 
This news also brought cheers to the Auto sector as automobile manufacturers said it was a festival gift for them. 
 
<a href="http://www.businessinsider.in/Raghuram-Rajans-reasons-for-the-huge-unexpected-rate-cuts/articleshow/49149054.cms">The rate cut</a> will help the <a href="http://www.businessinsider.in/searchresult.cms?query=auto+sector">Auto sector</a> to meet 15-20% sales growth during the upcoming festive season. 
 "This is a festival gift. Traditionally, during the festive season, the auto industry witnesses sales growth of 15-20%, which was missed in the last couple of years. This reduction in rate by the RBI has assured that the growth will be achieved," said <keyword id="103788" type="CITY" weightage="20" keywordseo="Hyundai-Motor-India-Ltd">Hyundai Motor India Ltd</keyword> (HMIL) Senior Vice President (Marketing and Sales) Rakesh Srivastava. 
 
The reduction in interest rates will reduce cost of ownership and help the automakers get more customers. Automakers generally expect higher sales during the months of October and November when Durga Puja, Diwali and other festivals are celebrated. 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=maruti+suzuki">Maruti Suzuki India</a> Executive Director Marketing and Sales R S Kalsi also echoed the same sentiments. 
 
“The market so far has been moving very slowly but with this (rate cut) sentiments will improve. It gives the much-needed boost to the market in the pre-festive season,” said Kalsi. 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=hero+motocorp">Hero MotoCorp Chairman and MD Pawan Munjal</a> also lauded the rate cut and said it came at an opportune time as it will help in raising customer sentiment during the festival season. 
 
The RBI cut its policy rate from 7.25% to 6.75% -- the lowest in four-and-half years. 
 
(Image: Indiatimes)

Raghuram Rajan is the auto sector’s latest messiah!

<ul><li>This is India's first rate cut in 18 months. </li><li>Furthermore, the central bank changed its stance to “neutral”, indicating a possibility of another rate cut in the next few months. </li><li>After retail inflation crashed to a 18-month low in December 2018, it was widely expected that the RBI would have enough leeway to cut rates this month. </li></ul>The Reserve Bank of India (RBI) opted to cut <keyword id="6371181" type="UNKNOWN" weightage="20" keywordseo="interest-rates">interest rates</keyword> by 25 basis points to 6.25%. Furthermore, the central bank, which is now headed by government insider <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword>, changed its stance to “neutral”, indicating a possibility of another rate cut in the next few months. Markets had already run up on Wednesday hoping for this slash in interest from the RBI. Benchmark indices, Sensex and Nifty, continued to hold on to the gains after the decision. After retail inflation crashed to <a href="https://www.businessinsider.in/no-low-inflation-is-not-always-a-good-thing-heres-why/articleshow/67541528.cms">a 18-month low</a> in December 2018, it was widely expected that the RBI would have enough leeway to cut rates this month after having to hike rates consecutively in June and August last year and maintaining a “calibrated tightening” stance in December. However, the <keyword id="6354642" type="PERSON" weightage="20" keywordseo="Modi">Modi</keyword> administration’s expansionary budget put a question mark around those plans. A cash handout scheme for farmers, a pension scheme for informal sector workers and tax breaks for the middle class have raised the probability of fiscal slippage. The stimulus package was expected to have an inflationary effect, which is why many thought that the RBI would opt for a wait-and-see approach. In June 2018, the central bank hiked rates for the first time in four years in response to higher inflation and a depreciating rupee - both of which were a outcome of rising fuel prices. The last time the RBI opted for monetary tightening was in January 2014, when it increased the repo rate to 8% to keep inflation in check. It had since reduced interest rates to support economic growth amid a global decline in oil prices. 
 



 
 
 
 
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 As fuel and food prices have moderated in recent months, the latter due to oversupply in the agricultural sector, inflation has been consistently trending downwards. Furthermore, having stalled at 3.6% for 2018-19 and 2019-2020, retail inflation is well below the RBI’s target of 4%, which had raised the prospects for a rate cut. 
 
 
 
 









 
 
 
 
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 Excluding food and fuel, core inflation has hovered around the 6% owing to higher medical and education costs. The divergence across different inflation baskets has caused the RBI to opt for conservatism when it comes to interest rate decisions. With the inflation outlook subdued, amid lower crude prices, the RBI likely felt the need to cut rates to spur economic growth. More importantly, ahead of national elections in May, a reduction in the cost of home loans and short-term loans for working capital is expected to lead to higher consumer and business confidence. SEE ALSO: <a href="https://www.businessinsider.in/india-markets-update-sensex-nifty-recover-late-and-moodys-on-budget-fiscal-deficit-target/articleshow/67831968.cms">Markets just can't believe India's latest budget math</a> <a href="https://www.businessinsider.in/heres-why-the-reserve-bank-of-india-hiked-interest-rates-for-the-first-time-since-january-2014/articleshow/64490708.cms">Here’s why the Reserve Bank of India hiked interest rates for the first time since January 2014</a>

India’s central bank cuts interest rate to give growth a chance

The <keyword id="6354335" type="CITY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) cut repo rate by 25 bps to 6.25% and now banks have to be active in passing it to the consumers so that people, especially the home-buyers, benefit from the interest rate cut. 
 The repo rate cut by <keyword id="3715773" type="UNKNOWN" weightage="20" keywordseo="rbi-governor-urjit-patel">RBI Governor Urjit Patel</keyword> has indeed come as a good news for home-buyers as <keyword id="6388045" type="COMPANY" weightage="20" keywordseo="emis">EMIs</keyword> are now expected to go down. 
 
Now, it all depends on the banks as since 2015, despite the RBI slashing the repo rate by 1.50%, the banks have passed on a mere 0.5%. 
 
However, one of the main losers due to the repo rate cut will be people having Fixed Deposits (FDs). This is because, with a lower repo rate, banks will also cut the deposit rate if liquidity is comfortable. This will impact depositors and investors and is expected that the interest on FDs will fall in the immediate future. 
 
If you are still confused on all the repo rates and Cash Reserve Ratio (CRR), here’s the simplified version: 
 
Repo rate: 
Repo rate is the rate at which the RBI lends money to the banks when there is fund crunch and is cut or increased, keeping the inflation in mind. So, if inflation is high and banks increase the repo rate, banks will have to take money from the RBI at a higher rate. 
 
Reverse repo rate: 
Reverse repo rate is the rate at which the RBI borrows money from the banks. If the Reverse repo rate goes up, banks will get more money to park their funds with the central bank. 
 
Cash Reserve Ratio (CRR): 
CRR is the minimum amount that banks have to keep from the total deposits of customers. This goes in the current account of the banks and they do not earn any interest on this. Presently, the CRR is at 4%. 
 
So, how does this affect you? 
 
Home-loans and Auto loans: If banks pass on the rates, consumers will benefit from the cumulative effect. EMIs will fall as banks will also lower down their lending rate as it all depends on banks’ marginal cost of funds based on lending rates. 
 
FD investors: This is impact the fixed deposits as the banks will have to cut rates on the FDs and people will earn less interest.

Decoded: Here’s how repo rate cut will help home-buyers and affect FD investors

Mumbai, Feb 6 () The constraint of high inflation made it difficult for the RBI to choose non-rate instruments to prop-up sagging growth, and it will be proactive in delivering a rate cut once the space becomes available, governor Shaktikanta Das said on Thursday. Till the space for a cut does not get available, the RBI will depend on liquidity management and ensuring better transmission of past cuts to boost growth, he said. Earlier, the RBI decided to hold rates as widely expected and affirmed to stick to the accommodatory stance for as long as it is required to boost growth. "While this decision might be on expected lines and perhaps widely discounted, it is important not to discount the Reserve Bank of India," Das told reporters later. "There is continuity (in having a status quo), but it should not be read as pointer for future actions of the MPC," Das said. Drawing attention to the 2019 experience, where the RBI cut rates by a cumulative 1.35 percentage point in five consecutive actions, Das said the rate setting monetary policy committee chaired by him will be "proactive" and "ahead of time" in delivering a rate cut. The space for a rate cut exists, he made it clear. Seeking to dispel possible notions of the RBI not having done enough by opting for a pause for the second consecutive time, Das said the RBI has a wide dashboard of instruments beyond rates that can be deployed. "It has to be kept in mind that the central bank has several instruments at its command that it can deploy to address the challenges that the Indian economy currently faces in terms of the sluggishness in the growth momentum," he said. One of them is the long term repo facility of Rs 1 lakh crore which will help in better transmission by sucking out the excess liquidity.Das enumerated how there has been a jump in transmission of past rate cuts into actual borrowing costs, which are generally deemed to influence GDP growth. Since February 2019, when the RBI started its rate reduction cycle, the one year median MCLR (marginal cost of funding based lending rate) has declined 0.55 per cent, the weighted average lending rate on fresh rupee loans is down 0.69 per cent and, WALR on outstanding rupee loans is down 0.13 per cent, he said. When asked if the moves on liquidity are akin to a hidden rate cut, Das said this is an attempt at bettering transmission. To a question as to why the RBI chose instruments like incentivising credit to specific sectors including auto and not cutting risk weights, Das said this was taken as the instrument of choice. He also added that the underlining theme of all the actions is financial stability and the central bank has to be watchful of this aspect from a perspective of prudence. When asked if we are opening up aggressively to foreign investors with interventions like relaxations on the debt investment limits, which can raise the cautionary flags for some because this is hot money which can move out swiftly, Das said there is a need to mobilise foreign money and also added that this money will be invested for a longer term. Getting foreign money also illustrates the robustness of the Indian economy, he said. AA MRMR

High inflation restricts RBI from choosing non-rate tools to support growth

<ul><li>At its first meeting of the financial year and the only meeting before general <keyword id="6355644" type="DEFINITION" weightage="20" keywordseo="elections">elections</keyword>, the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>’s Monetary Policy Committee (MPC) slashed rates from 6.25% to 6%. </li><li>The back-to-back rate cut - the first since the MPC was instituted in 2016 - was largely in line with market expectations, given the fact that <keyword id="22195" type="COMPANY" weightage="20" keywordseo="Inflation">inflation</keyword> is still subdued and <keyword id="6368751" type="UNKNOWN" weightage="20" keywordseo="banks">banks</keyword> are being slow to transmit lower rates. </li><li>However, the RBI maintained its stance at “neutral”, indicating a slight uncertainty about monsoon and inflation forecasts in the latter half of the fiscal year. </li></ul>The Reserve Bank of India decided to cut rates again on April 4th At its first meeting of the financial year and the only meeting before general elections, the RBI’s Monetary Policy Committee (MPC) slashed rates <a href="http://downloadpolicy1.rbi.org.in/PR236465F5E32CDA894E1C8A45D87371A50D9E.PDF">from 6.25% to 6%</a>. The six-member committee voted 4-2 in favour of the cut. The back-to-back rate cut - the first since the MPC was instituted in 2016 - was largely in line <a href="https://www.businessinsider.in/heres-why-indias-central-bank-could-cut-interest-rates-again-this-week/articleshow/68666693.cms">with market expectations,</a> given the fact that inflation is still subdued and banks are being slow to transmit lower rates. A rate cut will boost lending growth as well as consumer and investor sentiment as India heads to the polls. In fact, the Sensex reached record highs of <a href="https://www.google.com/search?q=sensex&amp;rlz=1C1GCEU_enIN820IN820&amp;oq=sensex+&amp;aqs=chrome..69i57j69i60l3j0l2.2592j0j7&amp;sourceid=chrome&amp;ie=UTF-8">39,241 points </a>on Wednesday on expectations of another rate cut. However, the RBI maintained its stance at “neutral”, indicating a slight uncertainty about monsoon and inflation forecasts in the latter half of the fiscal year. Inflation is still subdued, which in turn, also exerts a downward pull on economic growth. 
 
 
 
 
 
 
 
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 Consumer price inflation rose to<a href="https://www.business-standard.com/article/economy-policy/retail-inflation-rises-to-4-month-high-of-2-57-in-february-2019-119031200605_1.html"> 2.57%</a> in February 2019 as fuel and electricity prices as well as the cost of household items like vegetables and dairy products increased. Despite hitting a 19-month low of 1.97% the previous month, it is still well below the RBI’s 4% target. India Ratings, a domestic ratings agency, expects <a href="https://www.indiaratings.co.in/PressRelease?pressReleaseID=36434&amp;title=-Fiscal-Stance%2C-Declining-Households-Savings-Impacting-Bond-Market-Yields-">inflation to stay subdued </a>in the near term as households prioritise savings over consumption. The data showed that the persistent decline in price growth has bottomed out due to a rebound in food and petrol prices. However, despite the recent uptick, inflation is expected to stay below the RBI’s medium-term target for the rest of the year. Tanvi Jain, of UBS Securities, <a href="https://in.reuters.com/article/india-economy-inflation-views/expert-view-indias-retail-inflation-picks-up-in-february-to-2-57-percent-idINKBN1QT1KJ">told Reuters</a> that headline core price inflation will be under 4% - the lower bound of the RBI’s target range - until October 2019 with an overall average of 3.8% for fiscal 2020. At its previous meeting in early February 2019, right after the government presented its interim budget, the RBI cut rates to 6.25% from 6.5% <a href="https://www.businessinsider.in/rbi-policy-update-cuts-interest-rate-citing-low-inflation-and-it-may-boost-growth/articleshow/67880230.cms">in a bid to boost economic growth </a>in the last quarter of the year. This was the central bank’s first rate cut in 18 months. At the February meeting, the six-member monetary policy committee, led by RBI Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword>, changed the bank’s policy stance from “calibrated tightening” to “neutral”, indicating a higher probability of a few more rate cuts this calendar year. The latest MPC decision comes amid cautious projections of growth. India's Central Statistics Office lowered the estimated growth rate for 2018-19 to 7% from 7.4%. At a press conference following the rate decision today, the RBI said that it had lowered its growth forecast for 2019-2020 to 7.2% from an original estimate of 7.4%. Yesterday, the Asian Development Bank also <a href="https://www.livemint.com/politics/policy/adb-cuts-its-india-gdp-growth-forecast-for-2019-20-a-day-ahead-of-rbi-policy-1554264352085.html">lowered its GDP growth</a> forecast for India this year from 7.6% to 7.2% owing to a weaker-than-expected rise in investment growth. Industrial production growth declined to a mere 1.7% in January 2019, compared to 7.5% a year ago, owing to weak capital goods spending by the government as well as sluggish electricity generation and mining output growth. It had recovered slightly the previous month from a 17-month low in November 2018. 
 
 
 
 
 
 
 
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 In a bid to spur growth and boost investor confidence, the RBI has also given liquidity support to markets through a $5 billion currency swap - a move <a href="https://www.business-standard.com/article/economy-policy/rbi-to-again-go-for-5-billion-dollar-rupee-swap-auction-on-april-23-119040200046_1.html">it is set to repeat later this month</a>. While the rate cut was received favourably by the market - the Sensex surged by over a 1000 points following the decision - some industry bodies felt that it wasn't enough given the slowdown in growth and inflation. 
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 SEE ALSO: <a href="https://www.businessinsider.in/heres-why-indias-central-bank-could-cut-interest-rates-again-this-week/articleshow/68666693.cms">Here’s why India’s central bank could cut interest rates again this week</a> <a href="https://www.businessinsider.in/indias-wholesale-inflation-rebounded-last-month-from-the-10-month-low-it-hit-in-january/articleshow/68404635.cms">India’s wholesale inflation rebounded last month from the 10-month low it hit in January</a> <a href="https://www.businessinsider.in/rbi-policy-update-cuts-interest-rate-citing-low-inflation-and-it-may-boost-growth/articleshow/67880230.cms">India’s central bank cuts interest rate to give growth a chance</a>

The Reserve Bank of India has cut interest rates for the second time in two months

<a href="http://www.businessinsider.in/searchresult.cms?query=axis+bank">Axis Bank</a> revised its base rate from 9.85% to 9.50% and the revised rate will be effective from October 5. 
 
This year, the bank had cut its base rate by 10 bps to 9.85%, which was effective June 30; and by 20 bps to 9.95%, effective April 13. 
 Meanwhile, the effective rate applicable to various fund-based credit and credit limits, which are linked to the <keyword id="6355975" type="CITY" weightage="20" keywordseo="Axis-Bank">Axis Bank</keyword>’s base rate, will reduce by 35 basis points. 
 
The news comes after <a href="http://www.businessinsider.in/searchresult.cms?query=raghuram+rajan">Governor of Reserve Bank of India (RBI) Raghuram Rajan</a> cut <a href="http://www.businessinsider.in/BREAKING-NEWS-RBI-cuts-repo-rates-by-50-basis-points-CRR-unchanged/articleshow/49148486.cms">repo rates</a> by 50 basis points to 6.75% and kept the Cash Reserve Ratio constant at 4%. 
 
READ ALSO: <a href="http://www.businessinsider.in/Raghuram-Rajans-reasons-for-the-huge-unexpected-rate-cuts/articleshow/49149054.cms">Raghuram Rajan’s reasons for the huge, unexpected rate cuts</a> 
 
Rajan had said the impediments for banks to pass on rate cuts were removed but not much was transmitted by the banks. 
 
"There are various impediments to transmission. They add to the lag, even when transmitted monetary policy takes time to work. It could take a long time when not active. Ask the government about what it wants to do about transmission. We intend to have enough liquidity in the market, to supply what is needed in the markets right now,” he had said. 
 
Other lenders like <a href="http://www.businessinsider.in/searchresult.cms?query=state+bank+of+India">State Bank of India</a>, Andhra Bank have also reduced the base rates. It is likely that more banks will follow the suit.

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