RBI cuts interest rate by half percent

October 1, 2015 Finance Talk Valli Sarvani No comments

The decision of RBI to cut interest rate by half percent is welcomed by everyone in Indian industry. The industry in India is now expecting faster transmission by banks because the reduced interest percentage would result in a boost to the much needed investment and consumption demand in the economy.

Even though the policy rate has been reduced by 125 basis points due to the cut, only 30 basis points has been transmitted in form of lending rates. FICCI president Dr Jyotsna Suri says that FICCI is looking forward to a faster transmission by banks.

It was also proposed to reduce the risk weights which are applicable to reduce value housing loans. This could be quite a positive move. Doing this will be in line with the ‘Housing for all’ initiative by the government. It gives much needed support to the subdued activity in the housing sector.

Suri further stated that improvements in the housing construction sector will improve core sectors which will result in increase of overall investments and growth.

The decision to cut down half percent in interest rates surprised many. The aim of this move is to increase the economy and reduce home, consumer and industry loan rates.

According to CII Director General Chandrajit Banerjee everyone in Industry is happy with the move by RBI. They are glad that RBI saw the need for reducing borrowing rates to cause recovery.

He added that the move by RBI helped in reducing uncertainty with regard to borrowing costs faced by industry. Soon it is expected that the corporate sector will be in a better position and be on a path to recovery in investment and growth.

The decision of Reserve Bank of India is expected to impact many sectors especially the auto and real estate sectors. Hence, several people from these sectors have welcomed this decision and felt happy about it. They also expressed that certainly it will boost the economic growth.

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