RBI Cuts Repo Rate, EMIs May Come Down
The Reserve Bank of India reduced the Repo rate by 25 basis points (bps) to 7.5% on Wednesday, 4th March, 2015. Know the impact on loans and investment.
New Delhi, India, March 16, 2015 (Newswire.com) - Approving and appreciating the Budget 2015, RBI governor, Raghuram Rajan has slashed repo rate by 25 basis points to a 7.5%. In less than two months, this is the second time Reserve Bank cuts repo rate promising lower EMIs for the home loan mortgagor and reasonable bank credits for business houses planning to indulge in their expansion.
Monetary instruments of the RBI are used to curb the demand and cool prices aiming to establish a control on the inflation rate. Repo rate, the rate at which the Central Bank provides money to the commercial bank is being used as the tool in the times of stunted growth and flat prices to allure companies to invest, add resources and capacities and to convince people to buy house, cars and other goods. According to the creditors, this RBI rate cut is a breakthrough policy that is being expected to drive the economy to higher in growth trajectory.
This RBI rate cut will allocate more cash in the hands of consumers that will help in the revival of the demand in the economy. Home loan interest rates will be lowered helping the consumers to save big bucks. According to the conjecture, home loan borrowers will be able to save Rs. 831 a month if the amount of loan is about Rs. 50 lakh with the tenure of repayment being 20 years with the current repo rate. The markets were pleased with this move that was reflected in the BSE sensex rising over 430 points which crossed the 30,000 mark first time ever. Under this new policy that is viewed as the biggest monetary reform of the epoch, RBI has set a new target for retail inflation of below 6% by January 2016 and 4% by March 2017. This policy structure will also help the RBI to design the appropriate measures for achieving the target.
Now the point to ponder on is whether this benefit of RBI rate cut will be passed on to the customers. The experts are of the view that it will certainly be passed on for the advancement of the economy. It is very clear from the statement made by the RBI Governor where he said, “Further monetary actions will be conditioned by incoming data, especially on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates, the monsoon outturn and developments in the international environment”.
Hence this RBI rate cut not only pave ways for lower EMIs but also a cherished walk towards the positive growth of the economy.
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