The Reserve Bank of India on Thursday lowered the repo rate, or the interest rate at which it lends to commercial banks, by 25 basis points to 6%. This is the second time in two months that the central bank has cut the rate.
The reverse repo rate, too, was lowered to 5.75% from 6%. The reverse repo rate is the rate at which the central bank borrows money from commercial banks.
The six-member monetary policy committee, headed by RBI Governor Shaktikanta Das, decided to maintain the policy stance at “neutral”. The bank rate was fixed at 6.25%.
The RBI has projected economic growth for the current financial year at 7.2%.
The central bank said since the last committee meeting in February 2019, global economic activity has been losing pace. It also noted that crude oil prices rose around 10% since the last policy.
“The MPC notes that the output gap remains negative and the domestic economy is facing headwinds, especially on the global front,” the RBI said in a statement. “The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish.”