RBI cuts key interest rate by 0.25%

The Reserve Bank of India cut benchmark interest rate by 0.25 per cent to 6.25 per cent on expectation of inflation staying within its target range, a move that may translate into lower monthly installments for home and other loans.

The central bank also changed its monetary policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening on its approach towards interest rates.

In the first policy review under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut, while the decision to change policy stance was unanimous.

The RBI cut its estimates on headline inflation which cooled off to a 18-month low of 2.2 per cent in December for the next year, and expects the number to come at 2.8 per cent in March quarter, 3.2-3.4 per cent in first half of next fiscal and 3.9 per cent in third quarter of FY20.

Benchmark interest rate was cut by 0.25 per cent to 6.25 per cent, a move that would result in lower cost of borrowing for the banks that are expected to transmit the same to individuals and corporates.