RBI May Go For Another 25Bps Rate Cut In August 6 MPC Meet

As the need to sail through economic fallout due to Covid 19 becomes a priority, the RBI in its upcoming monetary policy meet is yet again expected to go for another 25 basis points rate cut. This is even as the repo rate now stands at a historical low of 4%. Repo rate is the rate at which RBI lends money to commercial banks for short term needs.

Also, the likelihood of rate cut gathers pace despite inflation figures for the recent month being higher than RBI's comfort level of 2-6% by a few notches.

The Monetary Policy Committee (MPC), headed by RBI Governor, is scheduled to meet for three days beginning August 4 and announce its decision on August 6.

In last two-off cycle meeting which were though necessary amid the Covid 19 outbreak, resulted in a total 115 bps cut in repo rate.

"We anticipate a further asymmetric cut of 25 basis points in the Repo Rate and 35 basis points in the Reverse Repo Rate, in a split decision from the MPC," opined Aditi Nayar, Principal Economist, ICRA.

Expressing similar views, Union Bank of India managing director and CEO Rajkiran Rai said, "There is a possibility of a 25 basis points cut or they may hold on (the rate)."

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