The Reserve Bank of India in its Second Bi-monthly Monetary Policy has announced to reduce the Repo Rate by 25 basis points to 5.75 percent. This is for the third time in a row in a year that the RBI has been cutting down the rate. The first rate cut was announced in February 2019, while the second was announced in April.
It was in 2013 when the RBI has taken this measure to revive the slipping Indian economy.
The move is likely to bring cheers among thousands of homebuyers who are planning to take a loan to purchase their dream property. The reduction in the repo rate will bring down the interest rate on which the banks offer loans to the borrowers. However, it remains to be seen whether banks will pass on this benefit to the loan borrowers or not.
The RBI has issued a notification after the meeting got over. Apart from Repo rate, the notification further informed, “The reverse repo rate under the liquidity adjustment facility (LAF) stands adjusted to 5.50 percent, and the marginal standing facility (MSF) rate and the bank rate to 6.0 percent,”
It also added that the monetary policy committee (MPC) has also decided to change the monetary policy’s stance from “neutral” to “accommodative”.
Sharing his views on the falling GDP, RBI Governor Shaktikanta Das said, “The Reserve Bank of India will not hesitate to take any measure which is required to maintain the financial stability of the system including, short-term, medium-term and long-term.”
Repo rate is that rate of interest at which banks borrow money from the central bank. As and when the RBI cuts the repo rate, it is mandatory for all the banks to pass on the benefits to the loan borrowers.