RBI Rate Cut To Lower Home, Automobile Loan EMIs

Business

Published at: Mar 5 2015 1:30 PMRBI rate cut to minimize home, auto loan EMIsLow inflation prompts moveSensex soars to 30,000

Sanjeev Sharma

Tribune News Service

New Delhi, March 4

The Reserve Bank of India (RBI) today cut the benchmark interest rate by 25 basis points, which is expected to minimize equated monthly instalments (EMI) on home and auto loans.

The RBIs decision to cut its policy or repo rate to 7.5 percent after another cut from 8 percent to 7.75 per cent on January 15 sent the benchmark BSE Sensex soaring to the historical 30,000-mark in opening trade.

The move, prompted by inflation staying low, comes within days of Finance Minister Arun Jaitley announcing in the Union Budget plan that the government was committed to financial consolidation.

RBI Guv Raghuram Rajan stated the rate cut was triggered by low inflation and fiscal consolidation in the Spending plan. He stated with the release of the contract on the financial policy structure, it was appropriate for the RBI to offer guidance on how it would implement the mandate. For the 2nd time in 2 months, the rate cut has actually come outside the monetary policy. The 2 cuts now imply that the RBI has actually cut 50 basis points in 2 months and considering that last time the cuts had not really been passed on, the extra cut will give more incentive to the banks to decrease rates on loans.

The Finance Ministry has invited the RBI choice to cut policy rate by 0.25 percent and stated it would bring down EMIs, boost demand and boost financial growth.

What is going to happen to rate cycle progressing is going to be driven by information and the RBI has indicated this clearly, Minister of State for Finance Jayant Sinha said.