The policy repo rate is now 6.25 per cent – a six-year low. The RBI expects the transmission of this cut in lowering the costs of new borrowing in the economy will be more effective than the earlier cuts. Gauged by those standards, the first rate decision of the MPC does not inspire much confidence, though. As regards the impact of the rate cut, three issues loom large: credit growth, stressed assets/NPAs of banks and corporate investment. An unjustified rate cut has hurt the credibility of the newly formed MPC.

Source: The Hindu October 23, 2016 17:26 UTC