Reserve Bank of India (RBI), taking a long awaited step by the loan consumers and industry, has softened the repo rate, the rate at which banks borrow from the RBI, by 25 basis points or 0.25 percent to 7.75 percent. This is the first such step taken by the RBI for last nine months.
The latest step by the RBI will provide some relief to existing as well as potential bank loan consumers because after this step the EMI and loan rates are set to become cheaper.
In a surprise move, the RBI has also slashed the cash reserve ratio (CRR), the share of deposits banks must keep with the central bank, by 25 bps to 4.00 percent. This step will infuse an additional 180 billion rupees into the banking system.
Industries have hailed the RBI's move. Industry body Assocham said reduction in policy rates will address the growth and liquidity concerns in the economy. The Chamber President, Rajkumar N Dhoot said that RBI has started taking positive steps towards reduction of key policy rates equally concerned with the moderating GDP growth.
“The reduction of both CRR and repo rate are the steps in the right direction. However, the system has to take this in the true spirit and the benefits have to be passed on to the end users,” Dhoot said in a statement.