RBI cuts repo rates by 25 bps to 6 per cent, home loans may get cheaper
Home and personal loans may now be cheaper with the Reserve Bank India cutting repo rates by 25 basis points t 6 per cent. The RBI's monetary policy committee led by RBI governor Urjit Patel announced the decision on Wednesday. The cut on key rates is expected to bring down interest rates of personal, home and auto loan.
This is the first rate cut since October 2016.
As expected repo rate, at which central bank lends short-term money to banks, has been cut to 6 per cent from 6.25 per cent making an overall difference of 0.25 per cent. The committee was of the view that the moderation in price trends have persisted long enough to warrant lower loan costs, necessary to engineer a quick industrial turnaround and drive people to spend more.
"The transmission has been much stronger in new lending, particularly in personal loans and home loans. Real rates are one of the driving factors behind our decision but not the only factor. There is room for banks to transmit more for sectors that have not yet availed the full benefit of rate cuts from the central banks," said RBI governor Urjit Patel.
"Inflation has fallen significantly in last three months due to the implementation of GST and good monsoon. Growth forecast remains unchanged at 7.3 per cent for the current fiscal," the RBI Governor added.
The monetary policy committee has decided to keep the policy stance neutral and to watch incoming data in anticipation of the trajectory of inflation in the baseline projection rising from current lows. The committee is focused on keeping inflation close to 4 per cent on a durable basis. The committee added that the government and RBI were working in close coordination to resolve large stressed corporate borrowers and recapitalize public sector banks within the fiscal deficit target.
Nifty traded in the green on Wednesday's opening session owing to the anticipation of the interest rate cut by the RBI. The rupee hit a two-year high ahead of the announcement.