Click to play videoNew Delhi: The Reserve Bank of India (RBI) has cut the short-term lending (repo) rate by 100 BPS to 8 per cent.
Finance Minister P Chidambaram said that the repo rate cut is another step to ease liquidity. The Finance minister also added that the move will kick start growth that had turned sluggish recently.
Maintaining that the rate cut was consistent with his ministry’s policy of maintaining growth, P Chidambaram also added that it will moderate inflation.
RBI has confirmed that the repo rate cut will come into effect immediately and will alleviate pressure on credit market.
Leading bank, HDFC spokespersons said that the rate cut is a signal from the RBI of interest rates softening from here on. But the bank refused to comment if the benefit will be passed on to the consumer.
It is too soon to cut home loan rates according to HDFC.
RBI says that the repo rate cut is a deliberate and calculated move to maintain financial stability in the country, even as global financial situation stays uncertain and unsettled.
While global uncertainty is transmitted to other countries, the RBI continues to monitor the impact of global developments on local markets.
The RBI also promises to take action as appropriate to monitor local liquidity conditions.
Bank of India has expressed that the repo rate cut is a big relief for the banking sector.
It also hoped that the lending will now become more viable.
Bank of Baroda spokesperson said that interest rates cannot come down overnight and that the deposit rates have to come down first. HDFC Bank’s Chief Economist Abheek Barua said that he was surprised by the timing of the repo cut.
The infrastructure sector too welcomed the move. Unitech said that the cut should hopefully translate to cheaper home loans. Housing giant DLF said it will definitely mean cheaper home loans in the near future.
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