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RBI cuts repo rate by 25 bps to 6%; home and car loan to be cheaper

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RBIA dream of own home and car of people may come true, as EMI of home or car loan is going to be eased.  The Reserve Bank of India (RBI) on Thursday cut the repo rate by 25 basis points to 6 per cent in the first bi-monthly monetary policy meet of the financial year (FY) 2019-20. It indicates that home or car loan will be cheaper.

It was the first back-to-back rate cut by the central bank since the Monetary Policy Committee (MPC) was formed in late 2016. In its last policy meet in February and the first under Governor Shaktikanta Das, the central bank had lowered the repo rate by 25 basis points (bps) or 0.25 per cent to 6.25 per cent and changed the policy stance to neutral from calibrated tightening, adopted in October policy meet last year. Repo rate is the rate at which the RBI lends money to the commercial banks, in case of any shortfall of funds.

Most economists and market experts had forecast a rate cut amid benign inflation and slowdown in growth both at home and abroad. Inflation has remained below the RBI’s 4 per cent target for seven straight months but core inflation, which excludes food and fuel, is running closer to 5.5 per cent. A rate cut just a week before the start of seven-phase Lok Sabha elections is crucial for the ruling NDA party.

Khushru Jijina, MD and Piramal Capital and Housing Finance stated, “It is necessary to resurrect India’s consumer demand and economic growth before a synchronous downturn in advanced economies heighten market volatility. Today’s rate cut and moderation in liquidity coverage ratio coupled with recent instances of liquidity injections indicate that RBI is cognizant of these risks. These measures would certainly help ease liquidity and improve access to cheaper credit by India Inc as well as retail consumers.”

“The focus to align the Indian housing finance securitisation market as well as the secondary market for corporate loans with international best practices as announced today will essentially deepen these markets and ensure better price discovery. We look forward to the detailed notes on RBI’s decision to allow Non Deposit taking NBFCs to apply for Authorised Dealer licenses which is expected to expand the forex market,” Jijina added.

 

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