Loan EMI to fall as RBI cuts interest rate
posted on Oct 4, 2016 @ 5:32PM
The Reserve bank of India has reduced the key policy rate or the repo rate by 25 bps to 6.25 per cent in the fourth bimonthly policy review announced on Tuesday. Retail inflation eased to a five-month low of 5.05% in August, within the committee’s 2-6% objective, and is expected to ease further in the months ahead after a good monsoon has sent food prices sharply lower. The 6-member Monetary Policy Committee, headed by Patel , reduced repo rate or the short term rate at which central bank lends to banks, to 6.25 per cent. Consequently, the reverse repo rate has also come down by a similar percentage point to 5.75 per cent. This is Patel’s first policy review after taking over from Raghuram Rajan on September 6. With Tuesday’s cut, the repo rate is now at its lowest level since November 2010. The RBI said all six members voted in favour of the rate cut, but did not give a breakdown. Daily prices of sensitive items under pulses, fruits, vegetables and cereals suggest that the seasonal surge in food prices may have peaked in July, it said.