Not too much, not too less: RBI stops at 35 bps cut

Not too much, not too less: RBI stops at 35 bps cut

As it is already stated in the MPC resolution, which is already put in the public domain, there is demand and investment slowdown.

Staff Reporter AgenciesUpdated: Wednesday, August 07, 2019, 11:08 PM IST
article-image

Mumbai: Moving away from the conventional way of changing key lending rates by 25 basis points (bps), Reserve Bank of India (RBI) cut them by 35 bps. The move was driven by slowdown in demand and investment. Commenting on this slowdown, RBI Governor Shaktikanta Das said the central bank reduced growth projection to 6.9% due to these factors.

Speaking about the Monetary Policy Committee (MPC) decision, he said, “As it is already stated in the MPC resolution, which is already put in the public domain, there is demand and investment slowdown. Both together are having a dampening effect on growth. We have reduced our growth projection to 6.9% with risk slightly to downside (due to this slowdown).”

Das added MPC took a call to go with 35 bps instead of conventional 25 bps or multiples of it which is 50 bps. “25 bps was inadequate and its next multiple—50 bps—would be excess.” Thus, based on the economic requirement, a balanced call was taken, he claimed.

Lowering the cost of borrowing can help prop up fresh investments and consequently push the sagging economic growth. Today's unprecedented 35 bps repo rate cut to 5.40% the cumulative reduction since February is a hefty 110 bps.

The RBI has reduced its growth projection for the Indian economy to 6.9% for the current financial year, from 7% forecasted in June, due to a slowdown. However, Das is confident that with various measures adopted by the Centre and RBI, there will be growth in last quarter of this financial year. “We expect growth in the second half this year to be around 7.5%.”

“The only forward looking guidance I can give is that our stance is accommodative which means rate increase is off the table,” he added.

Billing it right

The RBI has decided to cover all repetitive bill payments under the Bharat Bill Payment System (BBPS) and a detailed guideline in this regard will be issued by end of September. Currently, repetitive bill payments cover five segments— direct-to-home, electricity, gas, telecom and water bills under the BBPS—which is an inter-operable platform.

"In order to leverage the advantages of the BBPS and harness its full potential, it has been decided to permit all categories of billers (except prepaid recharges) who provide for recurring bill payments to participate in BBPS on a voluntary basis," the RBI said in 'Statement on Developmental and Regulatory Policies'.

24-hour NEFT

The RBI plans to make online payment system National Electronic Funds Transfer (NEFT) available round-the-clock in a bid to boost digital transactions. "As mentioned in the Payment System Vision 2021 document, the Reserve Bank will make available the NEFT system on a 24x7 basis from December 2019," the RBI said.

The RBI also proposed creation of a central payment fraud registry that will track banking fraud. At present, there is a Central Fraud Monitoring Cell of the central bank.

RECENT STORIES

Tax-Saving Tip From Zerodha CEO Nithin Kamath: 'If You're Married And Hindu..."; Here's How To Save...

Tax-Saving Tip From Zerodha CEO Nithin Kamath: 'If You're Married And Hindu...

Holy Cities Like Ayodhya, Varanasi Attracting Big Retail Brands: Report

Holy Cities Like Ayodhya, Varanasi Attracting Big Retail Brands: Report

A Big Relief For Byjus's: NCLT Rejects Investor Plea To Stay Byju's Rights Issue EGM On March 29...

A Big Relief For Byjus's: NCLT Rejects Investor Plea To Stay Byju's Rights Issue EGM On March 29...

Your Chocolates To Get Costly As Cocoa Price Surges To ₹8,33,892 Per Ton

Your Chocolates To Get Costly As Cocoa Price Surges To ₹8,33,892 Per Ton

Level Unlocked: Coal India Attains Annual Target, Scales 610.8-MT Supply

Level Unlocked: Coal India Attains Annual Target, Scales 610.8-MT Supply