RBI's move may be beneficial as it is seen improving consumer sentiment
RBI Governor Shaktikanta Das hinted the central bank was open to more rate cuts, though he cautioned the monetary policy committee's decision on this regard would be 'data-driven'
Shorter-end bonds outperformed while the drop in yields on longer-tenor paper was limited on supply concerns
The guidelines for these measures will be released by the RBI by the end of this month
It was the first monetary policy meeting under the new governor Shaktikanta Das, who took over as Governor, RBI after the abrupt exit of Urjit Patel from the office in December last year.
RBI has reduced repo rate (at which RBI lends to banks) by 0.25 per cent to 6.25 per cent, a move that will translate into softening interest rates
Currently, the banks are mandated to extend collateral-free agricultural loans up to Rs 1 lakh. This limit was fixed in the year 2010
The central bank unexpectedly lowered interest rates and, as anticipated, shifted its stance to 'neutral' to boost a slowing economy after a sharp slide in the inflation rate
Here're the key takeaways from the sixth bi-monthly monetary policy meet of RBI -
The decision to lower rates is surprising because the main factor which determines policy decision, i.e. CPI inflation potential remains unchanged
FPIs had felt some restrictions were too onerous and difficult to monitor, and wanted these to be done away with
RBI said the short-term outlook for food inflation appears particularly benign, despite adverse base effects
The central bank also changed its monetary policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening on its approach towards interest rates
The RBI press release said guidelines in this regard will be issued by the end of February 2019
Real interest rates in India are among the highest in Asia, and calls for the first cut in the policy rate since August 2017 have been growing
Perception of comfortable liquidity is different for RBI and markets
'If you say there are job losses where is this growth coming from,' Kumar said in response to criticism about lack of generation of employment
The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das will start its three-day meet in Mumbai on Tuesday and announce the policy on February 7
The inflation based on the Consumer Price Index (CPI) eased to an 18-month low of 2.19 per cent in December compared to 2.33 per cent in November and 5.21 per cent in December 2017
The consumer food price index contracted 2.51 per cent in December; in November, it had contracted 2.61 per cent