RBI drops repo rate by 50 basis points to 6.75 percent from 7.25 percent [ Current Affairs ]


About Repo rate: Repo rate is the rate at which the central bank of a country gives money to commercial banks in the incident of any shortage of funds. Reserve bank of India is the Central bank of India.

  • Repo rate is used by financial authorities to control price rises (inflation).

About dropping of repo rate by RBI:

Reserve Bank of India has dropped the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 6.75 percent from 7.25 percent in instant effect.

  • Liquidity adjustment facility is an economic policy which allows banks to use money through repurchases contracts.
  • LAF is used to help banks in correcting the day to day divergences in liquidity.
  • This is consists of repo and reverse repo operations.
  • It was declared in the 4th bi - monthly policy of RBI as from January 2015.

This decision was taken by RBI on the basis of a calculation of the existing and growing macroeconomic situation of India.

This decision was taken by following

  • Reduction of inflationary pressures,
  • Full monsoon outturn,
  • No changes in US central bank actions,
  • Greater broadcast of the RBI’s front - loaded previous actions.

- Published on: October 1, 2015