RBI slashes benchmark lending rate by 40 bps

Mumbai: In a surprise move, the Reserve Bank of India on Friday, May 22 slashed the benchmark lending rate by 40 basis points to mitigate the impact of the COVID-19 crisis.

In an off-cycle meeting of the Monetary Policy Committee (MPC), the decision was taken unanimously to cut repo to support growth.

Following the reduction, the repo rate has come down to 4 percent and the reverse repo rate has been cut to 3.35 percent.

The MPC, headed by RBI Governor Shaktikanta Das, has last reduced the repo rate (the rate at which central bank lends to banks) on March 27 by a staggering 0.75 percent to 4.14 percent.

Das on Friday said that the inflation outlook is highly uncertain due to the outbreak of the COVID-19 pandemic and expressed concern over elevated prices of pulses.

He also said there is a need to review import duties to moderate prices.

Headline inflation may remain firm in the first half of the year and may ease in the second half. Inflation may fall below 4 percent in the third or fourth quarter of the current fiscal, according to the Governor.

Further, Das said government revenues have been impacted severely due to the slowdown in economic activity amid the pandemic.