Raghuram Rajan Surprises Again, Cuts Rate to 4-Year Low; EMIs Set to Fall

Mangalore Today News Network

New Delhi 29 Sep, 2015 : Reserve Bank Governor Raghuram Rajan on Tuesday cut the benchmark repo rate by 50 basis points to a four-year low of 6.75 per cent in a surprise move. Most analysts polled by Reuters expected the central bank to slash rates by 25 basis points.

"The Reserve Bank has front-loaded policy action by a reduction in the policy rate by 50 basis points," Dr Rajan said in a statement.

Tuesday’s rate cut, the fourth this year, will help boost economic growth, which slowed to 7 per cent in the June quarter. The steep repo rate reduction is likely to come in for praise by policymakers. Finance Minister Arun Jaitley has been asking for a rate cut to meet his economic growth target of 8 to 8.5 per cent for the current fiscal year.

The 50-basis point rate cut boosted financial markets. The BSE Sensex, which traded nearly 300 points down ahead of the RBI policy announcement, bounced back in the green. State-run banks saw strong buying interest after the rate cut announcement.

The big rate cut is expected to bring cheer to millions of consumers who pay home loans EMIs or are looking to take a loan. Dr Rajan said he will work with the government to ensure effective transmission of interest rates.

"While the Reserve Bank’s stance will continue to be accommodative, the focus of monetary action for the near term will shift to working with the government to ensure that impediments to banks passing on the bulk of the cumulative 125 basis points cut in the policy rate are removed," Dr Rajan said.

Courtesy:NDTV