MUMBAI: In a move that should make mortgages, auto loans and other borrowings cheaper, the Reserve Bank of India cut interest rates by 25 basis points for the third time this year and hinted at more cuts by changing its policy stance from “neutral” to “accommodative”.Emboldened by benign inflation and availability of buffer foodgrain stock, the central bank’s monetary policy committee (MPC) voted unanimously to bring down the repo rate from 6% to 5.75% — the lowest since September 2010. Repo rate is the price commercial banks pay to the RBI for short-term funds.Announcing the MPC decision, RBI governor Shaktikanta Das said, “Growth impulses had weakened significantly. A sharp slowdown in investment activity, along with a continuing moderation in private consumption growth, is a matter of concern.” He added that the fact that the bank’s stance was changed to accommodative meant that rate hikes were off the table for now.Responding to comments that the earlier two rate cuts were not passed on, Das said banks have passed on 21 basis points through a reduction in lending rate. “In the past the transmission took about four to six months. But this time, it has happened in two to three months’ time. Going forward we expect faster and higher transmission by banks,” he said.A third reason for the rate cut was the return of the Narendra Modi-led NDA government in the polls last month which has firmed up hopes of fiscal responsibility.“They (RBI) have made it amply clear to corporates and business that capital will be made available for the right sustainable businesses at competitive costs. It is truly a coincidence that the central banks of the world’s two largest democracies are well-aligned to fuel growth and help create jobs in their respective economies. We continue to expect the RBI to cut another 50bps by March 2020 in the backdrop of the Fed’s likely cut of 75bps,” said Kaku Nakhate, president and India country head, Bank of America.“On the fiscal front, the governor mentioned that the government has broadly followed the fiscal glide path and is likely to stay fiscally prudent. This essentially means that unless there is a significant change in the fiscal deficit numbers for FY20 (compared to the interim budget), there could be room for the RBI to support growth through further interest rate cuts,” said Abheek Barua, chief economist, HDFC Bank.Following the rate cut, the bond and the forex markets reacted positively. The yield on the 10-year benchmark government bond yield fell to 6.8%, compared with Tuesday’s close of 7.0223%. The rupee, which had weakened to 69.36 against the dollar ahead of the RBI decision, strengthened to 69.28 in afternoon trade.“While the rate transmissions so far by the banks have only been modest in relation to the rate cuts announced, a pick-up in the pace of the monetary transmission would be one of the key drivers in supporting the growth estimates for the current year,” said Naresh Takkar, MD & group CEO, ICRA.“MCLR was introduced as a superior alternative base rate since it is calculated on the cost of raising new funds. Theoretically, this meant that changes in repo rate would force the banks to revise benchmark rates instantly. However, three consecutive repo rate cuts have not translated into a commensurate decline in MCLR due to multiple reasons such as fairly sticky fixed deposit rates and tight liquidity conditions in the system,” said Gaurav Gupta, co-founder & CEO, Myloancare.in.To that extent, MCLR has failed to perform as an effective and transparent policy transmission benchmark.