Newsbytes
  • India
  • Business
  • World
  • Politics
  • Sports
  • Technology
  • Entertainment
  • Auto
  • Lifestyle
  • Inspirational
  • Career
  • Bengaluru
  • Delhi
  • Mumbai
  • Videos
  • Visual Stories
  • Reviews
  • Phone Reviews
  • Fitness Bands Reviews
  • Speakers Reviews
  • Find Cricket Statistics
Hindi
More
In the news
Twitter
Vivo
Chitra Ramkrishna
Stock Market
Newsbytes
Hindi
Newsbytes
User Placeholder

Hi,

Logout


India
Business
World
Politics
Sports
Technology
Entertainment
Auto
Lifestyle
Inspirational
Career
Bengaluru
Delhi
Mumbai
Videos
Visual Stories
Reviews
Phone Reviews
Fitness Bands Reviews
Speakers Reviews
Find Cricket Statistics

More Links
  • Videos

Download Android App

Follow us on
  • Facebook
  • Twitter
  • Linkedin
  • Youtube
 
Home / News / Business News / RBI cuts repo rate by 0.25%
Business

RBI cuts repo rate by 0.25%

RBI cuts repo rate by 0.25%
Written by Vijaya
Edited by Achin Garg
Apr 05, 2016, 12:26 pm 4 min read
RBI cuts repo rate by 0.25%
Credits:

RBI has reduced the repo rates to 6.5%, a 0.25% cut against the expected 0.5%. The reverse repo rate has been hiked by 0.5% to 6%. While the CRR has been kept unchanged at 4%, MSF has been trimmed by 0.75% to 7%. RBI expects the economy to grow by 7.6% in the FY2016-17 and has kept the inflation target at 5% for FY2016-17.

Introduction
Definition of key monetary policy instruments

Repo rate is the rate at which RBI lends money to commercial banks in the event of any shortfall of funds. It is the key instrument of monetary policy to control inflation. Reverse Repo is the rate at which banks purchase government securities from RBI to lend it money and earn interest. MSF is an emergency borrowing (during cash shortage) by banks from RBI.

Inflation/growth
Repo rate to control inflation and boost growth

In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation. Decreasing the repo rates will have an opposite effect and increase the money-supply in the economy. More money means more spending, demand, investment and growth.

Monetary Policy
What is Monetary Policy?

The monetary authority, typically the central bank of a country, is vested with the responsibility of framing the monetary policy. Monetary policy refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit. It aims at setting the policy (repo) rate based on assessment of inflation, growth and other macroeconomic risks.

Information
Instruments of Monetary policy

Policy Repo rate, Reverse repo rate, Bank rate, Marginal Standing Facility Rate, and Reserve ratios - Cash Reserve Ration (CRR) and Statutory Liquidity Ratio (SLR) are some of the tools used by RBI in the implementation of monetary policy.

29 Sep 2015
RBI cuts repo rate by 50 basis points

In a surprising move, RBI cut its key repo rate by 50 basis points (bps) to 6.75%. This was a much needed step for boosting growth and investment demand. Talking about the rate cut, the fourth since January, RBI governor Raghuram Rajan said, "Banks should be able to pass on the entire rate cut of 1.25% this year to borrowers over time"

Sep 2015
Favorable conditions for rate cut

The developments on inflation front, US Federal Reserve rate policy, etc. have provided favorable conditions for Raghuram Rajan to lower the policy rates. Since the last policy in August, consumer price inflation eased to a record low of 3.66% in August 2015 from 3.78% in July 2015. The US Federal reserve rates too remained unchanged at near-zero levels as of 17 September.

29 Sep 2015
Jaitley welcomes rate cut by RBI

Finance Minister Arun Jaitley welcomed the RBI's decision to cut the repo rate, saying it will help in the recovery of the economy. He said it would provide policy support and added that the government was committed to meeting its fiscal deficit targets. Jaitley also said, "RBI rate cut actually implies that inflation has moderated significantly and is now in the comfort zone."

1 Dec 2015
RBI maintains status quo on policy rates

After giving a pleasant surprise of 0.5% reduction in Sept'15 bimonthly policy review, RBI had kept the policy rates unchanged in its 5th bimonthly review. This was widely expected by economists as RBI had already lowered policy rate by 1.25% in the year. Commercial banks, on the other hand, had not cut the rates commensurately and median base lending rates had declined by 0.6%.

Definition
What are base lending rates?

Base lending rates are the lowest rate at which the banks can lend except to a few sections such as weaker sections. Base rate which is applicable for all loans had not declined commensurately because rising NPAs are forcing banks to increase margins.

2 Feb 2016
RBI keeps policy rates unchanged

In its first bimonthly monetary policy review of the year, RBI has kept the policy rates and reserve ratios unchanged. The repo rate stands at 6.75%, while CRR at 4% and SLR at 21.5%. RBI governor, Raghuram Rajan has said that he would wait for the Union budget and more inflation data before being "accommodative". As expected, markets and rupee have reacted negatively.

5 Apr 2016
Markets react negatively

"Rate cut is sensible, given the current state of the economy", RBI governor Raghuram Rajan said without ruling out the possibility for another rate cut later this year. Notably, the rates are at a 5-year low. Markets were expecting a deeper cut of 0.5% and have reacted negatively to the less than expected rate cut. Both the Sensex and Nifty are trading in red.

Share this timeline
Facebook
Whatsapp
Twitter
Linkedin
Vijaya
Vijaya
Mail
Eternally curious (at times bordering on FOMO), firm believer of science and equality. Biotech graduate with a totally irrelevant marketing degree.
Achin Garg
Achin Garg
Mail
Latest
Latest
5 popular tourist places to visit in Lunglei, Mizoram
5 popular tourist places to visit in Lunglei, Mizoram Lifestyle
OPPO A57 (2022) debuts with MediaTek Helio G35 SoC
OPPO A57 (2022) debuts with MediaTek Helio G35 SoC Technology
Yamaha launches 2022 version of MT-25 in Japan: Details here
Yamaha launches 2022 version of MT-25 in Japan: Details here Auto
Realme GT Neo 3 now has a 512GB storage variant
Realme GT Neo 3 now has a 512GB storage variant Technology
IPL 2022: Rajasthan Royals beat RCB to reach final
IPL 2022: Rajasthan Royals beat RCB to reach final Sports
Next News Article
Next News Article

Love Business news?

Subscribe to stay updated.

Business Thumbnail
India News Business News World News Politics News Sports News Technology News Entertainment News Auto News Lifestyle News Inspirational News
Career News Bengaluru News Delhi News Mumbai News Mukesh Ambani Indian Premier League (IPL) Karnataka Samsung Xiaomi West Bengal
Bihar Virat Kohli Rohit Sharma Haryana Narendra Modi Arvind Kejriwal Tamil Nadu Gujarat Yogi Adityanath YouTube
Instagram Hollywood News Uttar Pradesh Kerala Netflix Bollywood News Mamata Banerjee Maruti Suzuki Rahul Gandhi Elon Musk
Shah Rukh Khan Chelsea FC OPPO Akhilesh Yadav Indian Cricket Team Apple Manchester United Salman Khan Cryptocurrency OnePlus
Amitabh Bachchan ICC Women's World Cup Vivo India vs Sri Lanka
About Us Privacy Policy Terms & Conditions Contact Us Ethical Conduct Grievance Redressal News News Archive Topics Archive IPL 2022 Schedule IPL 2022 Points Table Find Cricket Statistics
Follow us on
Facebook Twitter Linkedin Youtube
All rights reserved © NewsBytes 2022