Context:

• The six-member monetary policy committee headed by RBI Governor Shaktikanta Das has lowered the repo rate by 25 basis points to 6.25 per cent in a 4-2 vote.

Important decisions by the MPC:

• Together with lowering the repo rate by 25 basis points to 6.25 per cent, the policy stance has been changed to neutral from calibrated tightening.
• The shift in stance to neutral provides flexibility to meet growth challenges.
• The change in stance also signals higher chances of more cuts in the coming months if inflation persisted within tolerable limits.
• A large part of the current investment recovery has been driven by government spending and it was necessary to broad base the revival with a private sector boost.
• The limit of collateral free bank loans for farmers to Rs 1.6 lakh from Rs 1 lakh
• Greater operational freedom for Banks to offer interest rates to bulk deposits.
• The definition of “bulk deposits” has been increased to Rs 2 crore from Rs 1 crore currently.
• The headline inflation is likely to persist within the RBI’s tolerable level of 4 per cent.