New Delhi: In efforts to balance record-low inflation against a plunging rupee and an 8%-plus GDP growth rate, the Monetary Policy Committee has decided to cut the repo rate by 25 basis points to 5.25%. RBI Governor Sanjay Malhotra announced this on December 5.
The rate at which the Reserve Bank of India (RBI) lends to banks is called the repo rate. When the RBI reduces the repo rate, banks receive cheaper loans and pass this benefit on to their customers. This means that loans like home and auto loans will become cheaper by up to 0.25% in the coming days.
The second rate cut was by 0.25% in the April meeting. The third rate cut was by 0.50% in June. Now, another cut of 0.25% has been made. That means the Monetary Policy Committee reduced interest rates by 1.25% in three rounds.
After the latest reduction, the EMI on a ₹20 lakh loan with a 20-year tenure will be reduced by ₹310. Similarly, the EMI on a ₹30 lakh loan will be reduced by ₹465. Both new and existing customers will benefit.
While announcing the repo rate cut, the Indian governor cited that there has been a robust growth in gross foreign direct investment in the first half of the current financial year. Thus, causing India’s current account deficit to remain ‘modest’ this year. Foreign portfolio flows stood at $0.7 bn so far this year, primarily due to outflows from the equity segment.
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