RBI announces cut of 25 basis points in repo rate
MUMBAI: RBI today announced an interest cut of 25 basis points; a move that may lead to banks lowering EMIs for housing, car loan and corporate borrowers. Today’s policy decision was not only RBI Governor Urjit Patel’s maiden policy announcement but was also the first to be announced by the newly constituted Monetary Policy Committee.
All the six members of MPC unanimously decided to cut repo rate by 0.25 percent; bring in to a nearly six-year low of 6.25 per cent. This was also the first interest rate cut in last six months. According to the monetary policy statement, the decision to cut interest rates is consistent with the aim of achieving a midterm inflation target of 4 percent within a band of plus or minus 2 percent.
According to reports that bringing in some Diwali cheer for markets as well as consumers, RBI Governor Urjit Patel today announced a 25 basis point cut in repo rate.
The Monetary Policy Report issued this afternoon said that satisfactory monsoons and the implementation of the seventh pay commission hikes are expected to provide a boost to consumer spending, both in rural and urban areas.
It has however warned that growth may remain subdued due to muted private investments and weak global demand coupled with geopolitical risks. The monetary policy report says that GST implementation should boost business confidence and investment.
It adds that FDI in major sectors like defence, civil, pharma and broadcasting apart from measures to improve infrastructure and the enactment of Bankruptcy Code and Real Estate Bill should help accelerate growth.
RBI today also said that a pragmatic approach is required to handle the issue of bad assets while hoped that the transmission of interest rates by banks will improve in the next two quarters. The next monetary policy review will be announced on 7th December.
Meanwhile Economic Affairs Secretary Shaktikanta Das has welcomed the rate cut by the Reserve Bank of India. In a series of tweets, Mr Das said, Government expect Banks to follow it up with effective transmission of rates.
He said, RBI rate cut is positive for the economy and will contribute to the growth. The Secretary said, the rate cut will facilitate the move towards a low cost economy.
