The Reserve Bank of India (RBI) on October 4, 2019, reduced the benchmark repo rate for the fifth time in a row, the highest ever number of rate cuts in a row by the Monetary Policy Committee (MPC). The RBI reduced rates by 25 basis points (bps) each in February, April, June and October and by 35 bps in August this year, bringing the current repo rate to 5.15 percent. Including the latest rate cut, the total cut in repo rate in 2019 is 135 bps. The last time the repo rate was this low was in January 2009, when it stood at 5.50 percent. In fact, over the last two decades, RBI’s repo rate has dipped meaningfully below 6 percent only twice; this is happening now due to the current inflation-growth combination.
The MPC of India is responsible for fixing the benchmark interest rate in India. The Committee was created in 2016 to bring transparency and accountability in fixing India's Monetary Policy.  The meetings of the Committee are held six times a year, February, April, June, August, October and December. The MPC comprises six members - three officials of the RBI and three external members nominated by the Government of India (GoI). The Governor of RBI is the ex-officio chairperson of the Committee. Decisions by the Committee are taken by a majority with the Governor having the casting vote in case of a tie. The Committee members need to observe a ‘silent period’ of seven days before and after the rate decision for ‘utmost confidentiality’. The monetary policy is published after every meeting, with each member explaining his opinions.
The current mandate of the Committee is to maintain 4 percent annual inflation until March 31, 2021 with an upper tolerance of 6 percent and a lower tolerance of 2 percent. The Committee is answerable to the GoI if the inflation exceeds the range prescribed for three consecutive months.
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