Rate cut reflects view across industry sections: Finance Ministry

Minutes after the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) cut a key lending rate by 25 basis points in its first decision, the Finance Ministry lauded the policy and said that the similar view was held across industry sections.

"First decision of MPC reflects general development in the economy, and wide view held across sections of marketplace," Finance Secretary Ashok Lavasa told reporters here on Tuesday.

He said the rate cut will boost liquidity and lift up the market sentiments. At the same time, he asked banks to pass on the benefit to the end consumer.

"Rate cut will boost liquidity and market sentiment. Expect banks to change rates based on market sentiment. Overall sentiment positive, expect rural economy to rise," he said.

With the MPC's maiden decision, the repurchase rate, or the short-term lending rate charged by the Reserve Bank of India on borrowings by commercial banks, stands lowered to 6.25 per cent. The reverse repurchase rate also automatically stands lowered to 5.75 per cent.

This was the first meeting of the new policy panel, constituted by the government with the primary mandate to ensure a retail inflation of 4 per cent, plus or minus a band of two percentage points.

"RBI and government are in sync on inflation target. Many sectors of economies are showing upward trend," Lavasa said.

The MPC said that the decision taken was consistent with an accommodative stance, with the objective of achieving the inflation target.

The RBI on Tuesday forecast a growth of 7.6 per cent for the current fiscal, lower than the 8 per cent projected by the Finance Ministry.

--IANS

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