India, June 27 -- The Monetary Policy Committee (MPC) statement on June 6 announced a reduction in the Repo rate by 50 basis points to 5.50 per cent, cumulatively cutting the repo rate by 100 basis points since February.

It also surprised the economy by reducing the Cash Reserve Ratio (CRR) by 100 basis points to 3 per cent. This expansionary monetary policy (MP) move is expected to boost economic activity, as banks can borrow more and lend it to consumers and investors at lower interest rates. Following this, four public sector banks have already reduced the repo-related lending rates. The reduction in CRR further supports the lending spree, as it would release Rs 2.5 lakh crore, giving banks further impetus to lend.

MP could choose to...