Monetary Policy tweaks by RBI

August 7, 2019 August 7, 2019

The Reserve Bank of India (RBI) reduced the interest rate by 35 basis point (0.35%). This is the fourth successive reduction in the repo rate.

The repo rate is the rate at which the RBI lends to the banks of the country.
Repo rate is one of the sources of the lending amount available to the banks of the nation.
This money is then used by the banks to finance their day to day lending.
?A higher repo rate would make lending credit dearer to the banks which would increase the costs of loans and EMIs.
A lower repo rate would make borrowing cheaper as credit becomes cheaper for the banks to obtain.

The repo rate has been reduced by the government by a total of 110 basis points this year (a total of 1.1%).?
The reductions have been done in an attempt to boost the economy which is currently growing at its slowest pace in over 5 years.

The repo rate (RR) is decided by the Monetary Policy Committee (MPC).
The MPC comprises of 6 members (3 officials of the Reserve Bank of India and 3 external members nominated by the Government of India).
The ex officio chairperson of the committee is the Governor of the RBI.
All decisions are taken by a majority with the Governor having the casting vote in case of a tie.