The 25 basis points cut in the short-term lending rate is intended to bolster private consumption and revive private corporate investment sector.
Benchmark interest rate reduction will bolster private consumption and support a revival in private corporate investment, Reserve Bank Governor Sanjay Malhotra had opined while voting for a 25 basis points cut in repo rate along with other five members of the rate-setting panel earlier this month.
Governor Malhotra-headed Monetary Policy Committee (MPC) had reduced the short-term lending rate by 25 basis points to 6 per cent on April 9. A similar reduction was done in February.
"When consumer price inflation is decisively around its target rate of 4 per cent and growth is still moderate and recovering, monetary policy needs to nurture domestic demand impulses to further increase the growth momentum. This is specially so amidst an uncertain global environment, which has amplified downside risks to growth," said the minutes of the MPC meeting released by the RBI on Wednesday.
Malhotra had said it will bolster private consumption and support a revival in private corporate investment activity.
"Going forward too, considering the evolving growth-inflation trajectories, monetary policy needs to be accommodative," he said.
The next meeting of the MPC is scheduled from June 4-6, 2025.