RBI reduces repo rate to 4%, EMIs set to fall

New Delhi : Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced reduction in the Repo Rate to 4 per cent from current 4.4 per cent.

This is the second cut in repo rate or the key interest rate at which the RBI lends short-term funds to commercial banks so far this year. The move will enable banks to reduce the interest rates for their borrowers. The RBI Governor also extended the loan moratorium - which allows banks to defer EMI payments by their customers - by another three months till August.

While the repo rate was reduced to 4 per cent, the reverse repo rate - the interest rate at which the RBI borrows funds from commercial banks - was lowered to 3.35 per cent from 3.75 per cent.

The RBI Governor said the combination of fiscal, monetary and administrative measures will create conditions that will enable a gradual economic revival going forward.

In March, the RBI had slashed the repo rate by 75 bps to stimulate growth, and the next month, it unexpectedly lowered the key deposit rate - or reverse repo rate - to 3.75 per cent, in a bid to discourage commercial banks from parking idle funds with it and spur lending.