Lower loan, FD rates likely for NRIs as India cuts repo rate

RBI, Loans, economy,monetary policy committee , Rupee

This is the fourth consecutive time that the RBI has reduced repo rate.


Published: Wed 7 Aug 2019, 11:19 AM

Last updated: Wed 7 Aug 2019, 3:47 PM

The Reserve Bank of India on Wednesday cut the key interest rate for the fourth consecutive time as it reduced the repo rate by 35 basis points to 5.40 per cent to boost the slowing economy.
A fall in the repo rate, if passed on by banks to consumers, would mean cheaper home and auto loan rates, as well as lower interest rates on fixed deposits. For NRIs who like to park their funds in FDs, this means bad news.
The six-member monetary policy committee (MPC) also maintained the accommodative stance on the monetary policy.
Noting that inflation is currently projected to remain within the target over a 12-month ahead horizon, the MPC said since the last (June) policy, domestic economic activity continues to be weak, with the global slowdown and escalating trade tensions posing downside risks.
It said that even as the past rate cuts are being gradually transmitted to the real economy, the benign inflation outlook provides headroom for policy action to close the negative output gap.
This is the fourth consecutive time that the RBI has reduced repo rate. In the earlier three policies, it has reduced repo rate by 25 basis points each.
The RBI also revised real GDP growth for 2019-20 downwards to 6.9 per cent from 7 per cent in the June policy.

CPI inflation is projected at 3.1 per cent for the second quarter of FY20 and 3.5-3.7 per cent for second half of FY20, with risks evenly balanced.

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