Repo rate cut to benefit consumers, EMI to drop

RBI effects interest rate cut for third time this year as it sees strong economy growing on policy push

GN Bureau | June 2, 2015


#rbi   #reserve bank of india   #repo rate   #cash reserve ratio  


Showing confidence that the economy is in good shape to withstand any turbulence and sending out a strong signal to the banks to cut interest rates for consumers, the Reserve Bank of India (RBI) cut interest rates for a third time this year on Tuesday.  The RBI brought down the Repo Rate by 25 basis points to 7.25% but did not touch the Cash Reserve Ratio.

With the repo rate reduced, EMIs are likely to come down much to the relief of consumers.

The reverse repo rate stands adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 8.25 per cent.

Previous cuts, in January and March, had also been by 25 basis points.The reduction showed policymakers recognised the need to put the economy on a sounder footing, regardless of data released on Friday that showed India outpaced China by growing 7.5 percent in the March quarter.

"With low domestic capacity utilization, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today," the RBI said in a statement.

Still, the RBI did not take any new steps to free up cash-strapped commercial banks' liquidity, which bankers had said were needed for them to lower lending rates further and pass on the benefits of monetary easing to the broader economy. Instead, the central bank urged lenders to lower their lending rates.

The RBI also warned it would closely track inflationary trends, citing risks posed to food prices if monsoon rains are weaker than expected, or global crude prices recover, or the rupee weakens due to volatility in global markets.

"A more appropriate stance is to front-load a rate cut today and then wait for data that clarify uncertainty. Meanwhile banks should pass through the sequence of rate cuts into lending rates," the central bank said.

The rate reduction answered calls from both the government and businesses for the RBI to do more to shore up the economy.

While announcing the Second Bi-monthly Policy Statement for the year 2015-16, RBI Governor Raghuram Rajan said, "The rate cut is an attempt to boost investment. We have done what we think is 'appropriate' in view of current data."

In its credit policy review, the RBI expects Current Account Deficit (CAD) at 1.5% of Gross Domestic Product (GDP) in the financial year 2015-16. The RBI also expects inflation to start rising to 6% by January 2016.

There are considerable hopes that Prime Minister Narendra Modi's economic reforms and aggressive spending on infrastructure will solidify the gains in economic growth.

Policy Statement: Click here

Comments

 

Other News

Battle over cattle, Delhi govt schools lead the way and, why we must return to Gandhi & Tagore

On May 23 this year, the ministry of environment issued ‘Rules on prevention of cruelty to animals (regulation of livestock market)’ with the purported aim of regulating animal markets. When one reads the rules – notwithstanding the lame efforts from union ministers to issue clarificati

BEML unveils 9 MW capacity windmill park

  BEML, a mini ratna category-1 enterprise of the defence ministry, has set a target of using 100 percent renewable energy for its own consumption.   In this connection, BEML’s 9 MW Windmill Park installed at Bagalkot District in Karnataka was recently

BHEL registers increase in intellectual capital

  Bharat Heavy Electricals Limited (BHEL), a Maharatna enterprise, has recorded nearly 14 percent growth in its intellectual capital in 2016-17 fiscal. During the year, a record 508 patents and copyrights were filed by the company, translating into filing of nearly two patents/copyrights

NALCO partners with CII, Odisha for outreach programmes on GST

  National Aluminium Company Limited (NALCO) has joined hands with the Confederation of Indian Industries (CII), Odisha, to organise outreach programmes for industries and other stakeholders on GST implementation.   Series of interactive programmes are being

EPFO inks MoU with HUDCO for Housing for All by 2022

  Taking prime minister Narendra Modi’s vision of ‘Housing for all by 2022’ forward, Employees` Provident Fund Organisation (EPFO) has amended the EPF Scheme, 1952 to provide assistance in acquiring affordable houses to the EPF members by allowing withdrawal from PF to

IndianOil LPG import terminal to reduce refill backlog in Kerala

IndianOil is currently transporting bulk LPG from Mangalore to various LPG bottling plants in north Kerala through about 100 bullet trucks every day, which ply on narrow highways. A pipeline connecting the proposed LPG import terminal to Kochi Refineries Limited and the LPG bottling plants at Udayamperoo



Video

पाकिस्तानी सेना कैमरे में कैद करना चाहती थी ये हमला

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter