MUMBAI : RBI Governor Shaktikanta Das cut the interest rate by 0.25 percent to 6.25 percent, a move that will lead to reduction of lending rate by banks leading to lower EMI for housing, car loan and corporate borrowers. This is Das’ first monetary policy review after taking charge as the RBI Governor, replacing Urjit Patel.
The Monetary Policy Committee (MPC), headed by the RBI Governor Shaktikanta Das, also decided to change the monetary policy stance from ‘calibrated tightening’ to ‘neutral’, indicating that there could be further softening of the rates in the future. It was widely expected ahead of Thursday’s meeting that the MPC may not tinker with the policy rate but could restrict the changes to a shift in its stance to ‘neutral’.
The benefit of today’s 25 basis points reduction in repo rate to borrowers will hinge on how much of it banks pass on to their loan customers.
And since deciding on loan rates is the prerogative of banks, RBI Governor Shaktikanta Das will be soon meeting banks to understand and discuss transmission of the policy rate cut. “Transmission of cut in policy rates in banks’ lending rates may be incomplete and delayed given the slow incremental build-up in their deposits,” rating agency ICRA said in a note. According to bankers and analysts, measures announced in the policy indicate that the central bank wants to ensure that loan growth remains strong.
Loan numbers may also get a boost from the expected further rise in loan disbursals to non-bank lenders. Rating agency CRISIL expects credit growth of 13% in 2018-19 (Apr-Mar), higher than 7.4% reported in the previous fiscal. Deposit growth is expected to be 10%, partly supported by higher deposit rates. According to bankers, while overall liquidity position is adequate for them to fund credit growth, preference remains to fund it through deposits, especially retail liabilities, as it is margin secretive.(With Agency Inputs ).