RBI cuts repo rate by 25 bps to 6%. Loans could get Cheaper.

With retail inflation receding to record low levels, the Reserve Bank on Wednesday cut the benchmark lending rate by 0.25% to 6% - in its third bi-monthly monetary policy review.

The reverse repo rate was cut by 0.25% to 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent.

A move by the RBI will lower EMIs for home, auto and personal loans.

This is the first rate cut since October 2016 and the interest rate is now at 6-year low.

"The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," RBI said in a statement.

The RBI Governor headed Monetary Policy Committee (MPC) also stressed on urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana.

RBI said it is working in close coordination with the government to resolve large stressed corporate borrowings and recapitalise public sector banks.

Against the backdrop of a decline in factory output, with inflation at a five-year low, the ASSOCHAM had on Sunday wrote to the Reserve Bank of India (RBI) Governor Urjit Patel, stressing on the need to cut at least 25 basis points in the policy interest rate.

The retail inflation, which the RBI mainly factors in while deciding interest rate, has declined to historical low of 1.54 per cent in June. The wholesale price inflation for the month too has dropped to eight month low.