RBI Cuts Interest Rates By A Huge 75 Basis Points

The Reserve Bank of India (RBI) today cut repo rates by a huge 75 basis points, something that we have not seen in the past. Repo rates are rates at which the RBI lends money to banks. The country's central bank also slashed the reverse repo rate by 90 basis points, making it rather unattractive for banks to park money with the country's central bank.

"The Need of the hour is to shield the domestic economy from the COVID-19 pandemic," RBI Governor Shaktikanta Das said.

Today's decision to cut interest rates sharply is in line with what most central bankers in the world have done, including the US Federal Reserve, to battle the Coronavirus pandemic.

The decision was largely in line with expectations of a sizeable cut, given that manufacturing and economic acticity is expected to slump owing to the coronavirus infections.

RBI's Monetary Policy Committee (MPC) which met on March 24, 26 and 27 had a majority of 4-2 in favour of a 75 basis points repo rate cut.

It is almost certain given the quantum of cuts that loans would get cheaper in the coming days. The Sensex which was up 1,000 points gave-up gains after the announcement, which was in line with expectations.