Loans will get cheaper for customers as the Reserve Bank of India on Tuesday cut its key policy rate by 25 basis points in its fourth bi-monthly monetary policy review for the year citing a declining momentum in food inflation. All six members of its newly formed monetary policy committee voted in favour of a rate cut.
This was the first time that rates were set by a panel rather than the governor alone. The monetary policy committee chaired by new governor Urjit R Patel met for two days and decided to cut the repo rate from 6.25 per cent.
Consumer price inflation had decelerated to 5.05 per cent in August from over 6 per cent in July as good monsoons and better than expected sowing brought down food inflation. Growth pick-up, however, has been slow with a lower than expected first quarter GDP growth at 7.1 per cent.