25 Point Rate Cut by Reserve Bank of India

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Business Mantra: Faridabad

Mr. Raghuram Rajan has announced 1st Bi-monthly Monetary Policy and announced a reduction in short term lending rates by 0.25% from 6.75% to 6.50%. This is the lowest rate since January, 2015. With this reduction home loans and auto loans are likely to be cheaper further. With the system of calculation of lending rates based on Marginal Cost of funds based on Lending Rates (MCLR), it is likely that the Banks shall pass on this reduction in short term lending rates to the customers, specially, of home loans and auto loans which shall get immediate benefit.

Economic scenario of the country shows that the private investment is very low with low capacity utilization in manufacturing sector, so this reduction of 0.25% of rapo rate shall be beneficial for strong economy. But Cash Reserve Ratio has not been changed this time.

RBI has also announced certain corrective measures which shall help for smooth lending to productive sectors.

The existing repo rate was last observed in January, 2011.

Stock markets have reacted in reverse manner to today’s announcement as BSE index was down by 516 points while NIFTY index was down by 155 points.

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