Monetary Policy Review : RBI cuts Repo Rate by 25 basis points to 6.25

Reserve Bank Of India
Country's supreme banking authority, the Reserve Bank of India (RBI), has cleared a proposal to introduce new currency notes of Rs 200 denomination

Mumbai, Oct 04: The Reserve Bank of India (RBI), led by new governor Urjit Patel, has RBI cuts Repo Rates by 25 basis points to 6.25. He was largely expected to keep rates unchanged on Tuesday, with the prospect of a move later this year.

The Sensex reacted immediately, rising 100 points after the after RBI cuts. EMIs set to fall.

Earlier, former RBI Governor Raghuram Rajan had the final say on interest rate cut decisions. Patel now has to go by the advice of a newly set up six-member monetary policy committee.

This is for the first time that decision-making on interest rates has shifted to the six-member panel which has equal representation from RBI and the government.

After Reserve Bank’s policy effect Sensex rises more than 100 points at 2.31 p.m.

Before the dip in August, both the retail as well as wholesale price indices were on a continuous upward spiral The government had in August notified 4 per cent inflation target with a range of plus/minus 2 per cent for the next five years under the monetary policy framework agreement with the Reserve Bank.

Patel was the one who wrote the inflation glide path for RBI when he was deputy to former Governor Rajan, and analysts say it is unlikely that he will jettison his guard on price rise, especially under the new inflation targeting framework.

“RBI is unlikely to cut rate this time,” Union Bank of India Chairman and Managing Director Arun Tiwari said. On his policy expectations from the new Governor, he said Patel may announce “some more measures related to resolution of non-performing assets’