Economy

India Inc cheers RBI rate cut

India Inc cheers RBI rate cut

However, all the members agreed on changing the policy stance to neutral. The repo rate cut will lead to a decrease in EMIs on Home Loans, Car Loans and Personal Loans as the banks would likely decrease the interest rates.

RBI Governor Shaktikanta Das cut the interest rate by 0.25 percent to 6.25 percent, a move that will lead to reduction of lending rate by banks leading to lower EMI for housing, vehicle loan and corporate borrowers.

Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted for status quo in interest rates, while Das and three others voted for a cut in interest rates.

It expects the inflation numbers to print in at 2.8 percent in the March quarter, 3.2-3.4 percent in first half of the next fiscal and 3.9 percent in the third quarter of 2019-20. Policymakers predict inflation will rise this year but remain within the RBI's target range.

Technically, a 25 bps rate cut doesn't mean much to the borrower.

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He said the rate cut is in the right direction, given that the inflation footprint has been benign for some time. That scenario may change now because the new governor has his priorities on growth very clear and may not tolerate the idea of banks ignoring the RBI cues.

This was the first RBI policy meeting since Das took over as the RBI governor in December. That sends the message clear to lenders. The central bank has cut its estimates on headline inflation for the next year.

With inflation largely under control, the big concern for the government is growth, particularly in an election year.

In a statement, the policy committee cited slowing global growth and emphasized falling consumer price inflation among its reasons for the more dovish stance. The Financial Sector regulator, also says the Country's economic growth forecast at 6.3%, largely supported by public investments, credit growth and improved agricultural output is feasible. "In such a scenario, all levers must be used to strengthen India's domestic economy through greater consumption demand and investments", Somany said.