In a good news for consumers ahead of Diwali, bankers today promised to swiftly pass on the 0.25 per cent rate cut effected by the Reserve Bank to borrowers, a move that would lower home, auto and corporate loans.
“For the busy season of the financial year, a cut in repo rate by 25 basis point is indeed a welcome sign. With MCLR already stabilised, the pass through of this cut is expected to be quite swift,” said Dena Bank CMD Ashwani Kumar who is also chairman of Indian Banks’ Association.
SBI Chairperson Arundhati Bhattacharya said: “With benign inflation trajectory going forward, RBI’s policy stance is expected to remain accommodative. Banks will continue to transmit rates based on evolving liquidity scenario.”
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ICICI Bank Managing Director and CEO Chanda Kochhar said rate cut will boost investment as well as consumption.
“I welcome the RBI’s move to cut the repo rate by 25 basis points as well its intent to support liquidity. These steps will give a strong impetus to both consumption and investment led growth for the country.
“The strong focus by the government on supply side measures, which have resulted in containing inflation, has provided room to RBI to support growth through this rate cut,” Kochhar said.
In independent India’s first collective interest rate setting decision, the 6-member Monetary Policy Committee, which has three members nominated by the government and the rest from the Reserve Bank, lowered repo rate to 6.25 per cent from 6.50 per cent. The reverse repo rate stands at 5.75 per cent and Marginal Standing Facility rate at 6.75 per cent.
The rate cut along with reduction in small savings rates by the government will encourage banks to pass on the benefit to the borrowers, RBI Governor Urjit Patel said.
“The easy liquidity conditions engendered by the Reserve Bank’s operations should also enable the smooth transmission of the policy action through various market segments,” he said at the 4th bi-monthly monetary policy review of 2016-17.
First in six months, today’s cut came amidst big clamour for easing rates especially after the departure of former Governor Raghuram Rajan, who was often accused by some sections, including those from the ruling BJP, of stifling growth by keeping rates too high.
“The policy is clearly led by pragmatism. The unanimous decision of the Monetary Policy Committee to cut rates by 25 bps clearly signals continuation along the direction of growth,” said Federal Bank MD Shyam Srinivasan.