Monetary Policy Review: Reason why RBI reduced key lending rates by 25 BPS

Mumbai : Subdued inflation and demand prompted India's central bank, the RBI, on Wednesday to reduce its key lending rate by 25 basis points (bps).

According to the Reserve Bank of India's third bi-monthly monetary policy review of 2017-18, the repurchase rate, or the short-term lending rate for commercial banks on loans taken from it, stands lowered to 6 per cent from 6.25 per cent. 

Subsequently, the reverse repurchase rate, or the short-term borrowing rate, has been adjusted to 5.75 per cent from 6 per cent.

The decision to maintain the repo rate was taken by the six-member Monetary Policy Committee (MPC) headed by Patel. Four members of the panel voted in favour of reducing the key lending rate.

The six members of MPC are equally divided amongst government nominees and the RBI.