RBI’s big step: Repo rate cut by 50 basis points, loans will be cheap!

The Reserve Bank of India (RBI) has recently announced a significant reduction of 50 basis points (0.50%) in its major repo rate. With this deduction, the repo rate is now 6.75%. This rate is the rate at which commercial banks borrow money from RBI for their short -term needs.

The central bank has also fixed the reverse repo rate at 5.75% and the bank rate at 7.75%. At the same time, the cash reserve ratio (CRR) has been unchanged at 4%.

This decision has come at a time when the central bank is committed to control inflation pressure in the economy as well as to promote economic growth. The direct objective of cut in repo rate is to increase the liquidity in the market and make the debt cheaper.

Common consumers and businesses are expected to get direct benefit of this deduction. Due to decrease in repo rate, banks become cheaper from RBI, which they will also pass the benefit to customers. As a result, the interest rates of home loans, auto loans and corporate loans may be reduced. This will reduce people’s monthly installments (EMI) and increase the ability to spend, which can increase the total demand and investment.

Analysts believe that this step will not only reduce the debt burden, but will also encourage industrial activity in the country, which will help in employment generation and overall economic expansion. This decision of RBI is being seen as an attempt to revive the economy.