RBI repo rate cut: 5 MPC members voted for, 1 against; what did dissenter want?

The six-member Monetary Policy Committee (MPC) led by Reserve Bank of India Governor Shaktikanta Das on Friday decided to cut key repo rate by 40 basis points to 4 per cent from 4.4 per cent earlier. Of the six MPC members, one of the members, Chetan Ghate, voted against reducing the repo rate cut by 40 basis points and instead sought 25 basis points cut.

"On the quantum of reduction, the MPC voted with a 5-1 majority to reduce the policy rate by 40 basis points from 4.4 per cent to 4.0 per cent," Das said in this policy briefing. The five MPC members who voted for 40 bps cut include Pami Dua, Ravindra H Dholakia, Janak Raj, Michael Debabrata Patra and Shaktikanta Das. Ghate, however, voted for a reduction by 25 bps.

Also read: Big relief! RBI extends export credit period to 15 months from 1 year

The RBI also slashed marginal standing facility rate and the bank rate to 4.25 per cent from 4.65 per cent earlier. The reverse repo rate was also cut to 3.35 per cent from 3.75 per cent earlier.

In today's briefing, the RBI governor announced various developmental and regulatory policy measures to improve functioning of markets; support exports and imports; to ease financial stress caused by COVID-19 disruptions by providing relief on debt servicing and improving access to working capital; and steps to ease financial constraints faced by state governments.

Also read: India's GDP growth in FY21 to remain negative, says RBI's Shaktikanta Das

Das added that India's GDP growth was likely to remain in the negative zone in FY21, and that the growth might pick up in the second half of FY 2020-21.

He also said the monetary policy committee (MPC) believed the inflation outlook was uncertain at this point. The elevated level of pulses inflation is worrisome and immediate step-up of open market sales can cool down cereal prices, said Das.

Also read: Coronavirus impact: Inflation outlook uncertain at this point, says RBI's Shaktikanta Das

The RBI Governor also extended the loan moratorium by three more months till August, which will provide a huge relief to those paying loan EMIs but are not in position do so due to the coronavirus-induced lockdown impact.

The central bank also increased export credit period to 15 months from 1 year. Exporters had been demanding extension of the scheme in the wake of the COVID-19 crisis in India and across the world.

Also read: RBI Governor briefing highlights: Repo rate cut by 40 bps to 4%; loan moratorium extended by 3 more months