MUMBAI:
In a pleasant surprise, RBI today cut its policy rate by 0.25 per cent in the first reduction in 20 months and promised more, paving way for cheaper home and auto loans as also lower cost of funds for corporate borrowers.
While the Government, industry and stock markets cheered RBI’s much-awaited move, state-owned Union Bank and United Bank within hours lowered their respective benchmark lending rates by similar margin, giving relief to borrowers.
Others, including the PSU giant SBI and private sector major ICICI Bank indicated they will look at rate cuts soon to pass on the benefit to their customers from RBI’s lowering of repo rate, at which banks borrow from the central bank.
“Reduction in the rates is a positive development. It will lead to more money in the hand of the consumers and greater spending. It’s positive for the Indian economy,” said Finance Minister Arun Jaitley, who has been nudging RBI for a rate cut for months now.
The industry has also been demanding an interest rate cut to lower their cost of capital and help revive the investment cycle.
Jaitley said that the RBI decision would “certainly help in reviving investment cycle that the government is trying to restore”.
The Reserve Bank cut the repo rate by 25 basis points to 7.75 per cent with immediate effect, cheering the stock markets where the benchmark sensex soared by 847 points to 28,194 points during the intra-day trade. (AGENCIES)
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