Key things you need to know about RBIs Monetary Policy October 2019

As expected, the monetary policy committee cuts repo rate for the fifth consecutive time in October 2019. After the RBIs rate cut announcement Indian market gained some points, but due to lower than expectations the rate-sensitive stocks turned negative. Even Indian rupee and crude bond prices fell. Let’s read out a few takeaways from the RBIs policy.

RBI has cut repo rate by 25 basis points to 5.15 per cent from 5.40 per cent
The reverse repo rate stands to 4.90 percent
FY20 GDP estimate cut to 6.1% Vs 6.9%
RBIs MPC voted unanimously to reduce repo rate and maintain an accommodative stance
The GDP outlook for the year 2020-21 has also been revised to 7.2 per cent
RBI expects FY20 Q2 GDP growth to come in at 5.3%
Global economy is weighed down due to soften industrial production
The CPI inflation projection revised slightly upwards to 3.4 per cent for Q2, while projections are retained at 3.5-3.7 per cent for H2 2019-20 and 3.6 per cent for Q1 2020-21, with risks evenly balanced.
The RBIs step will help to strengthen private consumption and promote investment
The monetary transmission has remained staggered and incomplete
The weighted average lending rate (WALR) on fresh rupee loans of commercial banks declined by 29 bps (Feb-Aug 2019)
The WALR on outstanding rupee loans increased by 7 bps (Feb-Aug 2019)
RBI proposed to revise certain criteria for lending rates
Proposed to increase the household income limit for borrowers of NBFC-MFIs from Rs 1 lakh for rural areas and Rs 1.60 lakh for urban/semi-urban areas to Rs 1.25 lakh and Rs 2 lakh, respectively
Also proposed to raise the lending limit from Rs 1 lakh to Rs 1.25 lakh per eligible borrower
To promote better fund management system from banks, RBI has proposed the collateralized liquidity support on NEFT on all working days. Which means NEFT fund transfer will be available 24*7 from now onwards
Decided to institutionalize internal ombudsman for large non-bank Prepaid Payment Instrument (PPI) issuers. The instruction will be issued by October 15