Reserve Bank of India (RBI) hikes key policy repo rate by 25 basis points

On June 6, the 6-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) hiked the key policy repo rate by 25 basis points to 6.25% in its second bi-monthly monetary policy review of FY19. Concurrently, the reverse repo rate adjusted to 6.0%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.50%. This is the first time since January 2014 that RBI has announced a rate hike. Since then, RBI has either reduced the rate or maintained status quo. Repo rate is the rate at which RBI lends to banks generally against government securities while the reverse repo is the rate at which RBI borrows money from the banks. In its monetary policy statement, RBI revised CPI inflation projections for the first half (H1)of FY19 to 4.8-4.9%, and 4.7% in the second half (H2). RBI retained its Gross Domestic Product (GDP)?growth projection for the financial year at 7.4%.

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