The Reserve Bank of India (RBI) cut the key interest rate by a quarter point to 6% as expected without changing its stance, saying that it would remain on guard as price pressures may return in the wake of a house rent allowance payout and the July 1 rollout of the goods and services tax (GST). The economic growth forecast was retained at 7.3% amid prospects of a better harvest even though the industrial sector continues to struggle, which is partly due to a debt overhang. Inflation projections have been lowered marginally to just above 4%, from the top end of the band of 4.5% forecast earlier. This is the first cut in the repo rate — at which the central bank lends to banks — since October 4 last year, which also happened to be the inaugural meeting of MPC. The cash reserve ratio (CRR), the proportion of cash that banks have to keep with RBI, was kept unchanged. The central bank also showed that it is keen on bringing transparency to lending in the market and also ensure that rate reductions are passed on to consumers.

(Economic Times)