Home / Industry / Banking /  Loan EMIs set to get cheaper as RBI cuts repo rate

The Reserve Bank of India has cut key repo lending rate by 40 basis points to 4%. This is expected to bring down lending rates and deposit rates as well. RBI's monetary policy committee in an off-cycle meeting voted 5-1 for a 40 bps repo rate cut, while maintaining an accommodative stance. Reverse repo gets automatically gets adjusted to 3.35% from 3.75%.

The RBI on 27 March had slashed the repo rate by 75 bps to stimulate growth, following which, banks lowered their lending rates and deposit rate.

"We must have faith in India's resilience and come out of all odds," the RBI chief said, adding that the inflation outlook is uncertain at this point.

He expressed optimism that the combined effect of government's fiscal measure and RBI's steps will help boost growth during the second half of this year.

The government recently announced a 20 lakh crore economic stimulus package to deal with the fallout of COVID-19 crisis that included 8 lakh crore of liquidity measures announced by the Reserve Bank since March.

GDP growth for this year is seen in the negative territory, the RBI chief said.

In April, RBI also unexpectedly cut its key deposit rate or reverse repo rate to 3.75% to discourage banks from parking idle funds with it and spur lending instead, to revive a flagging economy amid the coronavirus lockdown. The rate had already been cut by 90 bps on March 27.

In March, RBI had also allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and May 31, 2020.

Last month, the RBI had also announced another round of targeted long-term repo operations and had also opened a refinance facility for the National Bank of Agriculture and Rural Development, the Small Industries Development Bank of India and National Housing Bank to meet the long-term funding needs of various rural and small sectors.

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