The central bank has announced a series of measures to tide over any liquidity issues caused by the Coronavirus dislocation in the markets
The finance ministry has been nudging public sector banks to pass the whole repo rate cuts to retail loans for pushing consumption
People remain a little skeptical on how much rate cuts can aid economic recovery at a time when coronavirus is getting a tighter grip on the world
To keep inflation under specified level, the government in 2016 had decided to set up MPC headed by RBI governor entrusted with the task of fixing the benchmark policy rate (repo rate)
The market has taken the long-term repos worth Rs 1 trillion as the biggest developmental and regulatory step that came out of the blue, analysts said
The RBI raised its inflation projection for the six months to Sept to 5-5.4% from 3.8-4% previously, while terming the outlook on price rise as "highly uncertain"
At the sixth bi-monthly policy announcement, where the policy rates were left unchanged, the Reserve Bank announced long-term repurchase agreements (repos) of one-year and three-year tenors
Following the November print of 5.54%, RBI had sprung a surprise and opted to hold the repo rate at 5.15 per cent. It, however, continued with the accommodative stance as long as it was necessary.
The 6-member Monetary Policy Committee (MPC), headed by RBI Governor Shaktikanta Das, unanimously voted to hold the key repo rate at 5.15% and reverse repo rate at 4.90%
GDP growth forecast for FY20 has been revised downwards from 6.1 per cent in the October policy to 5 per cent
Here's a selection of Business Standard Opinion pieces for the day
The gap between lending rates and RBI's repo rate has reached levels only seen in crises
The six-member Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 5.15 per cent
The policy decision will be announced at 11:45 a.m. in Mumbai, followed by a press conference 15 minutes later by Das
Rating agency Moody's Investor Services has already warned that the move would be credit negative for banks, causing volatility in net interest margins
The government's own assessment is that the lack of available credit is the worst in over 70 years
Current situation may not allow banks to significantly tinker with deposit rates making it tough to fully pass on the fall in repo rate
What is telling is that large swings in the Indian business cycle are still not a thing of the past, despite the adoption of inflation targeting in India
Shaktikanta Das likely to initiate required steps in coming weeks
Whilst the noise on feasibility of budget numbers and risks on sovereign borrowing would persist in the near term, the budget outcome has certainly eased the job for RBI MPC to ease rates further