Mumbai: Under RBI Governor Urjit Patel in the first monetary policy review, the interest rate was on Tuesday cut by 0.25 % to six-year lower of 6.25 % in a unanimous decision by the new rate-setting panel MPC.
The cut, first in six months, came over big demand for easing rates especially after the departure of former Governor Raghuram Rajan, who was often accused of preventing growth by keeping rates too higher.
The 6-member Monetary Policy Committee, headed by Patel, shorten repo rate or the short term rate at which central bank lends to banks, to 6.25 %. Consequently, the reverse repo rate has also come downward by a similar percentage point to 5.75 %.
The progress will lead to reduction of lending rate by banks leading to low EMI for housing, car loan & corporate borrowers.
The MPC decision is consistent with an accommodative opinion of monetary policy in consonance with the objective of achieving consumer price index (CPI) inflation at 5 % by Q4 of 2016-17 and the medium-term target of 4 % within a band of +/- 2 percent, while supporting growth, RBI said in the fourth bi-monthly monetary policy audit.
All the six members voted in favour of the rate cut decision.