Reserve Bank cuts repo rate to 7.25 per cent

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raghuram-rajan1

RBI has cut the repo rate by 25 basis points to 7.25 per cent from 7.5 per cent. In the RBI Governor’s Second Bi-monthly Monetary Policy Statement in this financial year, Dr Rajan also said that the RBI will keep the Cash Reserve Ratio (CRR) of scheduled banks unchanged at 4.0 per cent of Net Demand and Time Liabilities (NDTL). He also said the Bank will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate, and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions.

“Since the first bi-monthly monetary policy statement of 2015-16 issued in April 2015, incoming data suggest that the global recovery is still slow and getting increasingly differentiated across regions. In the United States, the economy shrank in Q1 owing to harsh weather conditions, the strength of the US dollar weighing on exports and a decline in non-residential fixed investment. In the Euro area, financial conditions have eased due to the European Central Bank’s (ECB) quantitative easing and a depreciating Euro”, the Statement assessed.

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