Question

As per news headlines, "RBI future cuts the repo rate to 5% What is the implicationof the statement with reference to Indian economy​

Answer 1

Answer:

The Reserve Bank of India's (RBI) rate cut yesterday brings cheer to borrowers but may well reduce fixed income earners to tears in the future. While a reduction in lending rates in the economy will clearly benefit loan takers, it also hits those living off income from fixed deposits when the rates on these go down.

RBI has cut the repo rate and reserve repo rate by 35 basis points (bps), respectively. This is fourth time in a row that the central bank has cut the key rate this calendar year, starting from February, 2019. (One basis point is equal to one hundredth part of one per cent.)

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In the three previous monetary policy reviews, RBI reduced the key policy rates by 25 bps each time. By adding this rate cut, in total, the central bank has reduced key policy rates by 110 bps. Post the policy announcement, the repo rate stands at 5.40 per cent down from 5.75 per cent. Similarly, reverse repo rate has also been reduced to 5.15 per cent from 5.50 per cent.