The RBI MPC has cut repo rate by 25 basis points to 5.75 percent from 6.0 per cent with immediate effect for third time in a row.
The RBI MPC has cut repo rate by 25 basis points to 5.75 percent from 6.0 per cent with immediate effect for third time in a row. The MPC notes that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy.
Consequently, the reverse repo rate under the LAF stands adjusted to 5.50 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.0 percent.
All members of the MPC unanimously decided to reduce the policy repo rate by 25 basis and change the stance of monetary policy from neutral to accommodative.
GDP growth for FY20 has been revised downwards from 7.2 percent in the April policy to 7 percent. This will be in the range of 6.4-6.7 percent for H1FY20 and 7.2-7.5 percent for H2FY20. CPI inflation has been revised to 3.0-3.1 percent for H1FY20 and to 3.4-3.7 percent for H2FY20.
The repo rate cut is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent, while supporting growth. The Bank has changed policy stance to accommodative.
The Reserve Bank of India (RBI) has set the minimum leverage ratio at 3.5 percent for all Indian banks and 4 percent for systemically-important banks, to maintain financial stability in the country.
“Keeping in mind financial stability and with a view to moving further towards harmonisation with Basel III standards, it has been decided that the minimum LR should be 4 percent for Domestic Systemically Important Banks (DSIBs) and 3.5 percent for other banks,” the RBI said in a statement on June 6.
Stock reaction:
Benchmark indices including the Nifty and Sensex are trading in the red with Nifty down 53 points intraday at 11,968 while the Sensex has shed 118 points and is trading at 39,965.
Bank Nifty is down half a percent following the 25bps rate cut. The top losers included Bank of Baroda, Federal Bank, IndusInd Bank, YES Bank, State bank of India, IDBI Bank, Syndicate Bank, Union Bank of India and Bank of India.
Nifty Auto is trading flat with the top gainers being Apollo Tyres, Eicher Motors, Maruti Suzuki, Motherson Sumi Systems and Exide Industries while the top losers are MRF, Mahindra & Mahindra, Amara Raja Batteries, Ashok Leyland and Bharat Forge.
However, Nifty Realty is marginally trading in the green with the top gainers being Indiabulls Real Estate, Oberoi Realty, Mahindra Life, Prestige Estates and Brigade Enterprises while the top losers are DLF, Godrej Properties, Phoenix Mills, Sunteck Realty and Sobha.
