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

How much time do you spend talking on phone?

How much time do Indians spend talking on phone? It is on average 761 minutes per month, according to a new report from the Telecom Regulatory Authority of India (TRAI). The telecom regulator released its report, titled ‘The Indian Telecom Services Performance Indicators: July-Septemb

“Developing public health infrastructure key to sustainable healthcare for all”

Renowned cardiologist Dr Ramakanta Panda has said that the pandemic has exposed the inadequacy of existing healthcare systems and it is wrong to draw comparisons with Korea, a country with the population equal to that of a single Indian state. While speaking to Kailashnath Adhikari, MD, Gove

SC-appointed panel on farm laws holds first meet

The committee of experts appointed by the supreme court to deliberate with the stakeholders on the new farm laws held its first meeting here Tuesday, with one of its members saying that all stakeholders, including individual farmers, will be heard. Hearing a petition on the farm laws enacted

India’s glitch-free vaccination gathers pace

The nationwide vaccination campaign launched Saturday, the largest such exercise in the world, has started setting new benchmarks, with vaccines administered to 2,24,301 beneficiaries in the first two days. “India has vaccinated the highest number of persons on Day1 under its COVID19 v

Maharashtra to spend Rs 2,500 crore to augment, develop power infrastructure

The Maharashtra government has announced a spending of Rs 2,500 crore annually to develop infrastructure of state-owned distribution company Mahavitaran (MSEDCL).   Out of the total amount, Rs 1,500 crore will be spent on energisation of conventional agriculture pumps and Rs 1,000 crore

Launched: Largest vaccination drive in history

India on Saturday began the massive vaccination drive against Covid-19, as prime minister Narendra Modi paid tributes the ‘corona warriors’. “Such a vaccination drive at such a massive scale was never conducted in history. There are over 100 countries having less than 3 cro

Visionary Talk with Dr Ramakanta Panda, VC & MD Asian Heart Institute





Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter