The Reserve Bank of India (RBI) has cut its repo rate under liquidity adjustment facility (LAF), or the rate at which it lends to banks, by 25 basis points to 6%, with immediate effect. <br />''<br />''This is the second consecutive rate cut from RBI under new Governor Shaktikanta Das, after a rate cut in February. <br />''<br />''The RBI on Thursday announced its first bi-monthly policy statement of the current financial year. <br />''<br />''Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent.<br />''<br />''The six-member Monetary Policy Committee (MPC) led by RBI Governor also decided to maintain the neutral monetary policy stance. <br />''<br />''<span style="color: #222222;">These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of plus or minus 2 per cent while supporting growth.</span>

The Reserve Bank of India in its monetary policy review today cut its policy repo rate under Liquidity Adjustment Facility (LAF) by 25 basis points to nearly six-year low of 6.25 per cent, from the earlier 6.5 per cent. This was the first monetary policy announced by the new RBI Governor Urjit Patel. Mr. Patel replaced Raghuram Rajan last month.<br/><br/>This is also the first rate cut policy decision made by the six-member Monetary Policy Committee (MPC), with all members voting in favour of the cut. Earlier, the decisions were taken solely by the RBI Governor. The decision of the MPC is in consonance to achieve Consumer Price Index (CPI) inflation at 5 pc and at the same time achieving a medium term inflation target of 4 pc. Besides this, the Reverse repo rate standing adjusted to 5.75 pc and the Marginal Standing Facility (MSF) rate and the Bank rate to 6.75 pc.<br/><br/>The Reserve Bank of India in its policy statement issued in Mumbai said the committee expects that the strong improvement in sowing, along with supply management measures, will improve the food inflation outlook. It notes that the sharp drop in inflation reflects a downward shift in the momentum of food inflation- which holds the key to future inflation outcomes.<br/><br/>The government has announced several measures to cool food inflation pressures, especially with regard to pulses. About service sector, the RBI says the acceleration in the pace activity in Q1 appears to have been sustained.<br/><br/>On economic growth, the RBI expects the momentum of growth to quicken with a normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to the urban consumption spending from the pay commission's award. The accomodative stance of monetary policy and comfortable liquidity conditions should support a revival of credit to the productive sectors. <br/><br/>On Liquidity, the statement says the conditions have remained comfortable for Q3. Liquidity was injected through open market purchases of 200 billion in line with the system's requirements.<br/><br/>About the risk factors, the RBI says global growth has been slowing more than anticipated with risks in the form of Brexit, banking stress in Europe, debt-fuelled growth in China etc. However, on domestic front the outlook for agriculture acitivity has brightened.