Rate cut to boost private investment, resolve debt overhang: Urjit Patel

The 0.25% lowering of the repo rate to 6% comes after a 10-month period

RBI Governor Urjit Patel today said inflation is expected to rise from record lows even as the central bank opted for a cut in key lending rate to a 6.5-year low "to reinvigorate private investment" and resolve the issue of mounting bad loans amid weak corporate balance sheets.

The 0.25 per cent lowering of the repo rate to 6 per cent comes after a 10-month pause and is the second since Patel took over last September.

Patel had last cut the key rate by 0.25 per cent in his first policy review last October, which also was the first decided by a Monetary Policy Committee (MPC).

"Recognising that inflation is expected to rise from the current lows (1.54 per cent in June) over the rest of the year, the MPC persevered with the neutral stance," Patel told reporters at the customary post-policy presser here.

"Government and RBI are working in close coordination to resolve large stressed corporate borrowers and recapitalise PSBs within the fiscal deficit target," he added.

Eventually, he said, these efforts should help restart credit flows to the productive sectors once demand revives.