New Delhi: In an effort to offer cushion the battered economy which has been badly impacted by the Covid-19 induced lockdown, RBI governor Shaktikanta Das has announced repo rate cut by 40 basis points (bps) to 4 per cent on Friday. Repo rate was slashed by 40 bps to 4 per cent from 4.4 per cent earlier.


What will be the impact of repo rate cut?

The cut in repo rate may likely bring down lending rates and deposit rates subsequently. This may result in your loans getting cheaper. The central bank’s monetary policy committee has decided to vote 5-1 in implementing the repo rate cut while taking an accommodative stance.

Consequently, the reverse repo rate gets adjusted at 3.35 per cent from 3.75 per cent earlier.

On March 27, the bank has cut the repo rate by 75 bps to support growth which helped banks in slashing their lending rates and deposit rate.

"We must have faith in India's resilience and come out of all odds. Today’s measures may seem tough but it will preserve financial stability for better tomorrow," the RBI chief said, adding that the inflation outlook is uncertain at this point.

In April, the central bank also unexpectedly cut its key deposit rate or reverse repo rate to 3.75 per cent. This has enabled banks from parking idle funds with RBI, and instead push lending that can help in reviving the battered economy which has been halted due to Covid-19 induced lockdown. The rate had already been cut by 90 bps on March 27.

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