RBI cuts repo rate by 0.25 per cent, EMIs on home, car loans to get lower
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RBI cuts repo rate by 0.25 per cent, EMIs on home, car loans to get lower

According to bankers, the reduction in repo rate - which is the rate at which Reserve Bank lends short-term funds to lenders - is likely to result in lower loan EMIs.

  • New Delhi,  April 5, 2016  
  • |  
  • UPDATED   14:32 IST

The Reserve Bank of India today cut the benchmark repo rate by 25 basis points from 6.75 points to 6.50 points, effectively ensuring that the EMIs on home, auto and other loans are set to get lower.

The announcement was made by Reserve Bank Governor Raghuram Rajan. This is his first rate cut in over six months. The cash reserve ratio has also been reduced from 95 per cent to 90 per cent, which will be effective from April 16.

The reduction in repo rate - which is the rate at which RBI lends short-term funds to lenders - is likely to result in lower loan EMIs. The government has been pitching for lower rates in a bid to boost demand in the economy.

Similarly, the statutory liquidity ratio, or the value of specified securities which commercial banks have to subscribe to, stands at 21.25 per cent, effective April 2 onward.

The central bank had last cut its short-term lending rate in September by 50 basis points to 6.75 per cent. Cumulatively, 2015 saw the monetary authority cut the repo rate by 1.25 per cent.

"Inflation has evolved along the projected trajectory and the target set for January 2016 was met with a marginal undershoot," Rajan said in his policy statement, adding that retail inflation was expected to decelerate modestly and remain around 5 per cent in this fiscal.

"After two consecutive years of deficient monsoon, a normal monsoon would work as a favourable supply shock, strengthening rural demand and augmenting the supply of farm products that also
influence inflation," he said.

"On the other hand, the fading impact of lower input costs on value addition in manufacturing, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook could impart a downside to growth outcomes going forward," he said.

He said the growth projection for 2016-17 was being retained at 7.6 per cent.