Repo rate is the rate at which the RBI lends money to commercial banks, in case of any shortfall of funds.
The Indian rupee opened on a steady note at 71.53 against the U.S. dollar in early trade on Thursday ahead of the Reserve Bank of India's monetary policy decision. "Transmission of rate cuts still remains an issue as the positive effect of the five consecutive rate cuts is not visible in the economy", Deepthi Mary Mathew, Economist at Geojit Financial Services said in a statement earlier this week.
The fact that the Reserve Bank of India (RBI) surprised market participants and left interest rates unchanged provided a goodish lift to the Indian rupee.
And while loans get cheaper for the people, the banks also reduce the interest rates on deposits. "The MPC also chose to continue with the accommodative stance as long as it is necessary to revive growth", HDFC Securities added.
Latest gross domestic product data showed growth slipped to a six-year low of 4.5% in the quarter to September, amid rising unemployment and a crisis in the shadow banking sector. The six-member Monetary Policy Committee, MPC, of the RBI, led by Governor Shaktikanta Das, will announce the credit policy for the current fiscal, a resolution passed by the ongoing three-day MPC meet in Mumbai. "However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture", the RBI said in its fifth bi-monthly monetary policy for this fiscal.
Headline inflation projection revised up to 5.1-4.7% for H2 2019/20, 4.0-3.8% for H1 2020/21.
The pickup in prices of vegetables is likely to continue in the coming months, the RBI said, alluding to the recent soaring costs of onions and tomatoes.
The central bank, however, slashed its annual growth forecast to 5 percent from 6.1 percent, as consumer demand and manufacturing activity contracts.