Wednesday 28th, February 2024
canara news

RBI surprises with rate cut; home, auto loans to cost less

Published On : 05 Oct 2016

New Delhi, (PTI) Home, auto and corporate loans may get cheaper as the new RBI Governor Urjit Patel-led panel today marked its debut policy review with a surprise 0.25 per cent rate cut -- lowering borrowing cost to 6-year low, which the industry lauded as a pre-Diwali gift.

In independent India's first collective interest rate setting decision, the 6-member Monetary Policy Committee, which has three members nominated by the government and the rest from the Reserve Bank, lowered repo rate to 6.25 per cent from 6.50 per cent.

First in six months, today's cut came amidst big clamour for easing rates especially after the departure of former Governor Raghuram Rajan, who was often accused by some sections, including those from the ruling BJP, of stifling growth by keeping rates too high.

The repo rate, at which RBI lends to banks, was 6.25 per cent in November 2010. It peaked to 8.5 per cent in October 2011.

Within minutes of the RBI policy announcement, the government welcomed the rate cut saying it will boost liquidity and help achieve 8 per cent GDP growth.

"The Government has announced several measures to cool food inflation pressures, especially with regard to pulses.

These measures should help in moderating the momentum of food inflation in the months ahead. This has opened up space for policy action, as indicated in the third bi-monthly monetary policy statement," Patel said in the fourth bi-monthly monetary policy review for 2016-17.

RBI's current rate cut along with reduction in small savings rates by the government will encourage banks to pass on the benefit to the borrowers, he said.

"The easy liquidity conditions engendered by the Reserve Bank s operations should also enable the smooth transmission of the policy action through various market segments," he said.

Following the rate cut, the BSE benchmark Sensex closed up by 91 points at 28,334.55.

Finance Secretary Ashok Lavasa said the RBI policy will boost liquidity in the system and both the RBI and government are in sync with the inflation target.

"On the whole, this is a decision which will go down well with all sections of the economy," Lavasa said.

When asked if banks will pass on rate cut, he said: "It depends on the banks. Banks also decides based on market sentiment".

Welcoming the rate cut as a 'pre-Diwali' gift, industry players hoped that banks would pass on the benefits and boost consumer sentiments in the ongoing festive season.

More News

Sensex, Nifty fall 1% as crude oil prices surge
Sensex, Nifty fall 1% as crude oil prices surge
Aamir Khan calls 'Thugs of Hindostan' role one of his toughest
Aamir Khan calls 'Thugs of Hindostan' role one of his toughest
Fuel prices continue to fall as global crude rates ease
Fuel prices continue to fall as global crude rates ease

Write your Comments

Disclaimer: Please write your correct name and email address. Kindly do not post any personal, abusive, defamatory, infringing, obscene, indecent, discriminatory or unlawful or similar comments. will not be responsible for any defamatory message posted under this article.

Please note that under 66A of the IT Act, sending offensive or menacing messages through electronic communication service and sending false messages to cheat, mislead or deceive people or to cause annoyance to them is punishable. It is obligatory on CANARANEWS to provide the IP address and other details of senders of such comments, to the authority concerned upon request.

Hence, sending offensive comments using canaranews will be purely at your own risk, and in no way will be held responsible.