RBI Monetary Policy 2019 Highlights: More money in your hands; Repo rate cut by 25 bps

RBI Monetary Policy 2019 Highlights: A major boost from the Reserve Bank of India (RBI) has come in the latest monetary policy report. RBI has cut repo rate by 25 bps (0.25%).  The MPC noted "that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy. A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. The headline inflation trajectory remains below the target mandated to the MPC even after taking into account the expected transmission of the past two policy rate cuts. Hence, there is scope for the MPC to accommodate growth concerns by supporting efforts to boost aggregate demand, and in particular, reinvigorate private investment activity, while remaining consistent with its flexible inflation targeting mandate."

RBI Monetary Policy 2019 Highlights

12.51 pm: RBI will push banks for passing on rate cut benefits to consumers: Governor Shaktikanta Das said that the central bank would make sure that transmission of reduced repo rate would be faster and higher. The MPC noted "that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy. A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. The headline inflation trajectory remains below the target mandated to the MPC even after taking into account the expected transmission of the past two policy rate cuts. Hence, there is scope for the MPC to accommodate growth concerns by supporting efforts to boost aggregate demand, and in particular, reinvigorate private investment activity, while remaining consistent with its flexible inflation targeting mandate."

READ | India GDP 2019-20: Good news! Political stability, repo rate cut to push growth up to 7.5% in H2, says RBI

12.42 pm: RBI has decided to do away with charges levied on RTGS and NEFT transactions, banks will be required to pass this benefit to their customers.

12.38 pm: Expert view on RBI repo rate cut: Garima Kapoor, Economist, Elara Capital, tells Zee Business Online, "Drawing comfort from consistent softness in inflation trajectory, MPC cut policy repo rate for the third time this year to support benign growth conditions. A shift in the stance to accommodative is welcome as it will pave way for transmission to lending rates, which so far have been inadequate. We expect MPC to cut rates by an additional 50 bps through the year while continuing to fine tune liquidity support through a combination of OMO purchases, forex swap and CRR cut."

12.35 pm: Das said, "RBI will not hesitate to take any measure which is required to maintain the financial stability of the system including, shot-term, medium-term and long term."

12.31 pm: RBI has decided to constitute a Committee to Review the ATM Interchange Fee Structure: "Usage of Automated Teller Machines (ATMs) by the public has been growing significantly. There have, however, been persistent demands to change the ATM charges and fees. In order to address these, it has been decided to set up a Committee involving all stakeholders, under the chairmanship of the Chief Executive Officer, Indian Banks’ Association (IBA), to examine the entire gamut of ATM charges and fees. The Committee is expected to submit its recommendations within two months of its first meeting. The Composition and Terms of Reference of the Committee will be issued within a week," the central bank said. 

12.28 pm: RBI closely monitoring NBFC sector, to ensure financial Stability, says Governor Shakti Kanta Das

#RBIPolicy | #RBI क्रेडिट पॉलिसी की अन्य बड़ी बातें।#CreditPolicy @AnilSinghviZEE @FinMinIndia @DasShaktikanta pic.twitter.com/9kVSAryWSR

— Zee Business (@ZeeBusiness) June 6, 2019

12.11 pm: The RBI has revised GDP estimates for FY 2010-20. The central bank said, "In the April policy, GDP growth for 2019-20 was projected at 7.2 per cent – in the range of 6.8-7.1 per cent for H1 and 7.3-7.4 per cent for H2 – with risks evenly balanced. Data for Q4:2018-19 indicate that domestic investment activity has weakened and overall demand has been weighed down partly by slowing exports. Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity. Further, private consumption, especially in rural areas, has weakened in recent months. However, on the positive side, political stability, high capacity utilisation, the uptick in business expectations in Q2, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity. Taking into consideration the above factors and the impact of recent policy rate cuts, GDP growth for 2019-20 is revised downwards from 7.2 per cent in the April policy to 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and 7.2-7.5 per cent for H2 – with risks eve"nly balanced."

12.05 pm: The MPC members included Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Shaktikanta Das They have unanimously decided to reduce the policy repo rate by 25 basis and change the stance of monetary policy from neutral to accommodative.

Highlights of RBI monetary policy

#RBIPolicy | #RBI क्रेडिट पॉलिसी की कुछ बड़ी बातें।#CreditPolicy @AnilSinghviZEE @FinMinIndia @DasShaktikanta pic.twitter.com/nBgjfltPy8

— Zee Business (@ZeeBusiness) June 6, 2019

12.04 pm: RBI said that the MPC decisions were 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 +/- 2 per cent while supporting growth. 

12.01 pm: RBI raises inflation projection to 3-3.1 pc for April-September. 

11.59 am: RBI on state of economy: The MPC noted "that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy. A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern. The headline inflation trajectory remains below the target mandated to the MPC even after taking into account the expected transmission of the past two policy rate cuts. Hence, there is scope for the MPC to accommodate growth concerns by supporting efforts to boost aggregate demand, and in particular, reinvigorate private investment activity, while remaining consistent with its flexible inflation targeting mandate."

#BreakingNews | #RBI ने ब्याज दरों में 0.25% की कटौती की।#RBIPolicy #RBICreditPolicy @AnilSinghviZEE pic.twitter.com/boAZZ80nOK

— Zee Business (@ZeeBusiness) June 6, 2019

11.55 am:  RBI statement - "On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to: reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.75 per cent from 6.0 per cent with immediate effect. Consequently, the reverse repo rate under the LAF stands adjusted to 5.50 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.0 per cent."

#RBIPolicy | #RBI ने अपना रुख न्यूट्रल से बदलकर 'अकमोडेटिव' किया..@RBI @FinMinIndia @PMOIndia pic.twitter.com/BT3ynRCO1l

— Zee Business (@ZeeBusiness) June 6, 2019

11..43 am: Good news! More money in your hands; RBI cut repo rate cut by 25 bps. 

11.37 am: Ahead of the MPC announcement, experts have been expecting 25-50 bps rate cut announcement by RBI. Speculations were rife over possible rate cut. Opinions were, however, divided over the extent of the rate cut. In a survey of economists and bankers by Zee Business TV on Monday, 80% of respondents expected the RBI to cut key lending rate (also known as repo rate) by 25 basis point (0.25%). Twenty per cent of the respondents, however, expected the central bank's MPC may cut rate by 50 basis point (0.50%). READ MORE

10.22 am: Taking a cue from global markets, the key Indian equity market indices on Thursday opened higher but immediately on commencement of trading, both the indices were quoting in red, ahead of the Reserve Bank of India`s bi-monthly monetary policy announcement.

10:15 AM: "Slower growth and lower inflation has given the RBI room to go in for a repo-rate cut," Sunil Kumar Sinha, Director -- Public Finance and Principal Economist India Ratings and Research (Fitch Group), told IANS. "We expect that there might be 25 basis points reduction in the repo rate, but the apex bank can also go in for a larger cut. However, progress of Monsoon and global crude oil prices will be key factors to determine the magnitude of the rate cut," he said. 

10:05 AM: State Bank of India's Group Chief Economic Adviser Soumya Kanti Ghosh believes that a large rate cut coupled with specific instructions on liquidity coupled with a budget laying down a manageable fiscal consolidation road map will help rev up the economy.

9:55 AM: The expected rate cut assumes significance as the overall economic growth rate in Q4, 2018-19 has slowed. In addition, macro economic indicators like core industrial production and automobile sales have slumped. The rate cut would allow the banks to reduce their lending rates and help both consumers and the industry to get cheaper finance.