By Accommodation Times News Services
In a view to boost the economic growth Reserve Bank of India (RBI) decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent. This is the first rate cut from RBI since 2013. With the effect to rate cuts EMIs for home loans is to be reduced.
Many leading banks and financial institutions has welcomed the RBI’s move to reduce the rates and they confirmed that soon EMIs will come down, as they will reduce their interest rates.
State Bank of India the leading government bank said, they are planning to cut down their lending rates following the RBI’s move, the board will take a decision on this. Union Bank of India also said it would cut its base rate by 25 basis points to 10 per cent from February 1. Hence, the sudden rate cut comes with a sigh of relief for borrowers.
The decision was sudden and came two weeks before the schedule date of monetary policy to be announced by RBI on 30th February.
“It has been decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent with immediate effect,” Reserve Bank said in a statement on Thursday. The RBI has been keeping the benchmark interest rate at elevated level at 8 per cent since January 2014.
The RBI, however, has decided to keep the cash reserve ratio (CRR), the portion of deposits which the banks are required to have in cash with the central bank, unchanged at 4.0 per cent. Following reduction in the repo rate, the reverse repo rate has been adjusted to 6.75 per cent and the marginal standing facility (MSF) rate and Bank Rate to 8.75 per cent.
The RBI said that the Consumer Price Index (CPI) has been easing since July 2014 and was below the expected trajectory and the government has reiterated its commitment to adhering to its fiscal deficit target.
In its public interactions, the RBI functionaries had committed to initiate the process of monetary easing as soon as data indicated that medium-term inflationary targets would be met, the statement said.