EMIs set to decline as RBI slashes 35 basis points in Repo Rate

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Reserve Bank of India
Reserve Bank of India

New Delhi : With Reserve Bank of India reducing the repo rate by 35 basis points to 5.40%, the Easy Monthly Installments (EMIs) are set to decline. This is fourth straight rate cut by the RBI, resulting in an effective rate cut of 110 basis points or 1.1% in the key lending rate.

Reverse repo rate stood at 5.15 per cent. The central bank has maintained its accommodative stance.

Repo rate is the rate at which the RBI lends to banks, while reverse repo rate is at which it borrows from banks.

"The decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," the Reserve Bank said in its bi-monthly monetary policy (MPC) statement.

"GDP (gross domestic product) growth revised to 6.9 per cent for this year from the earlier projection of 7 per cent," it added.

When the RBI cuts rates, banks are expected to pass on the benefit to consumers and reduce interest rates on home, auto, personal or other loans which may result in lower EMIs (equated monthly instalments).

RBI governor Shaktikanta Das, while briefing the media, said that the rate cut is balanced and assured sufficient liquidity to all required sectors.

The last time the RBI made so many back-to-back cuts was after the global financial crisis over a decade ago (2008), when most major central banks were desperate to revive economic growth.