The Monetary Policy Committee (MPC) has slashed the repo rate by 25 basis points to 6% from 6.25% on grounds of persistent moderation in price trends and lowering of inflation. Repo rate is the rate at which RBI gives loans to banks and NBFCs. The MPC consists of six members headed by the RBI governor. It was of the view that the rate cut was important to initiate a quick industrial turnaround which would motivate people to spend more.
Naveen Kukreja, CEO & Co-founder, Paisabazaar.com, said, "The RBI’s decision to cut repo rate by 25 basis points was widely being anticipated due to low inflation, subdued credit demand and the steep contraction in manufacturing. With the rate cut, the ball now lies in the banks’ court, to transmit the reduced rate to consumers in the form of cheaper loans. I expect the banks to pass on the rate cut to borrowers, but over a period of time."
While the rate cut may lead to banks reducing the interest rate on home loans, personal loans and other secured and unsecured loans in the future, it may also cause reduction in interest rates offered on deposits like fixed deposits, recurring deposits and savings account.