RBI to make loans cheaper? | Fusion - WeRIndia

A repo rate is the rate at which the Reserve Bank of India, or RBI, lends away money to Indian banks. A drop in repo rates signifies that there is also a lowering in interest rates.

A few days ago, as was generally expected, the RBI cut their repo rate by 25 basis points, leaving it at 6%.

It was a general expectation because the inflation rate of in Indian currency hit a record low back in June, reaching about 1.54%.

The Monetary Policy Committee (or MPC) of the RBI ended their two day-long meeting last week, during which they decided against the ambitious cut of 50 basis points in interest rates.

There was also another reason the RBI made this cut in interest rates: the Gross Domestic Product (or GDP) of the country. Industrial growth has been very slow in recent times, which has brought the GDP down to a rate of 6.1% in the March quarter.

Additionally, the reverse repo rates have also been cut by the RBI, now at a significantly lower rate of 5.75%.

The RBI has stated that, with these decisions, they are maintaining a neutral monetary policy that is also supportive of Indian economic growth at the same time.

Many people are now expecting the RBI to make cuts on the interest rates on loans, after the cut in general interest rates a few days ago.

These include cuts in home loans, cuts in auto loans, cuts in food loans, and the like.

This is also expected since it goes in line with the stated neutral but supportive monetary policies of the RBI.

Hopefully, these policies of the country’s Reserve Bank will allow the country’s economy to improve in the near future, so there can be a better overall outlook in interest rates for everyone.

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