Home loans could become cheaper
The Reserve Bank of India (RBI) on Tuesday cut the benchmark repo rate by 25 basis points to 6.5 per cent, as widely expected, with Governor Raghuram Rajan assuring that the monetary stance will remain “accommodative.” Bankers said the comment signals that the central bank is leaving the door open for further reductions.
The rate cut could help lower the cost of loans for consumers, including automobile and home buyers.
The RBI said easing price pressures had been a key factor in determining the policy stance and cited “government’s effective supply side measures keeping a check on food prices, and the government’s commendable commitment to fiscal consolidation.” Retail inflation slowed to 5.18 per cent in February after accelerating for six consecutive months.
The repo rate, which is at its lowest in five years, will help banks reduce borrowing costs, helping boost economic growth. “We have cut interest rates by 150 basis points since the beginning of the accommodative cycle,” Dr. Rajan told reporters.
The latest rate cut should be seen in the backdrop of banks reducing lending rates by 25 to 50 bps since adopting a new loan pricing mechanism — the marginal cost of funds based lending rate — in the first week of April, according to the RBI Governor.
The rate cut could help lower the cost of loans for consumers, including automobile and home buyers.
The RBI said easing price pressures had been a key factor in determining the policy stance and cited “government’s effective supply side measures keeping a check on food prices, and the government’s commendable commitment to fiscal consolidation.” Retail inflation slowed to 5.18 per cent in February after accelerating for six consecutive months.
The repo rate, which is at its lowest in five years, will help banks reduce borrowing costs, helping boost economic growth. “We have cut interest rates by 150 basis points since the beginning of the accommodative cycle,” Dr. Rajan told reporters.
The latest rate cut should be seen in the backdrop of banks reducing lending rates by 25 to 50 bps since adopting a new loan pricing mechanism — the marginal cost of funds based lending rate — in the first week of April, according to the RBI Governor.
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