RBI Governor Shaktikanta Das met Finance Minister Arun Jaitley on Monday, ahead of the crucial Monetary Policy Committee meeting to be held from April 2 to 4.

Speaking to reporters, Das said the meeting was customary and part of an ongoing tradition of the RBI Governor to meet the Finance Minister before a meeting of the Monetary Policy Committee (MPC).

The first bi-monthly meeting of the MPC for financial year 2019-20 will be held from April 2 to 4. This will be the last meeting of the MPC before the general elections, which is scheduled to be held from April 11 in seven phases.

The next meeting of the MPC will be held from June 3 to June 6. The upcoming meeting is being viewed as the last opportunity before the general elections to offer relief for individuals and businesses by way of lowered borrowing costs.

This seems possible as the situation appears to be quite conducive for a policy rate cut at present. The revision of repo rate depends on the movement in retail inflation, as represented by the Consumer Price Index (CPI), beside many other factors. At present, CPI is below 3 per cent, which means the MPC may consider cutting the rate.

In a surprise move, the MPC had cut the policy rate in February by 25 basis points to 6.25 per cent. After this, the RBI Governor met bank chiefs to press upon them the need to transmit the rate cut. Some of the banks did cut the rate, but only up to 10 basis points. Experts feel that if there is another rate cut now, there will be more pressure on banks to cut interest rates.

There is a feeling that the political system in power is keen to publicise this for electoral gains.

It is also to be noted that officially, the announcement of general election will not affect the review of monetary policy. Das also said on Monday that he will meet the heads of payments banks later this week to understand the issues being faced by them.

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