The Reserve Bank of India, on August 2, 2017, slashed its benchmark lending rate by 0.25 per cent to six per cent, citing a reduction in the upside risk to inflation. This reduction in the repo rate, at its third bi-monthly monetary policy review for 2017-18, could make EMIs for home, auto and personal loans lower.
This is the first rate cut since October 2016 and the interest rate is now at a six-year low. In line with record low retail inflation, the RBI governor-headed Monetary Policy Committee (MPC), cut policy repo rate by 25 basis points to six per cent and the reverse repo by a similar proportion to 5.75 per cent. The MPC also decided to keep the policy stance neutral and to watch incoming data, with a view to keeping headline inflation close to four per cent.
See also: Impact analysis of RBI’s relaxation of risk weightage norms for home loans
It stressed on the urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana. The RBI said that it is working in close coordination with the government, to resolve large stressed corporate borrowings and to recapitalise public sector banks.
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