RBI buttresses earlier position forcefully; economic forecasts conservative

The central bank cut the repo rate by 40 bps to 4% and the reverse repo rate was brought down to 3.35%

For the second time, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has met before schedule and taken a decision to lower the repo rate. This time it is by 40 basis points (bps) and the signal is quite strong that it will do anything to restore growth; hence, one may expect more of such cuts going ahead. The reverse repo rate also comes down to 3.35 per cent, which is significant as it becomes even less attractive for banks to put surplus funds here.

It will be interesting to see how banks react. These have