There a is a relief for middle income group with the Reserve Bank of India (RBI) cutting repo rate 25 basis point (0.25%) to 6.25%, which will be expected to make home and others loans cheaper.
RBI has kept expectation of inflation within its target range.
The Central Bank, under its new Governor Shaktikanta Das changed its monetary policy and has given signal for further softening of rates if inflation remain friendly.
The Hindu quoted a source from Central Bank claimed that two member of governing body, Deputy Governor Viral Acahrya and ChetanGhate, had voted for status quo. But Shaktikanta Das and three others outvoted them for reduction in repo rate to 6.25% from the existing 6.50%.
Reverse Repo Rate was reduced to 6% for its previous 6.25%. While reducing the interest rate the central bank said, “Continuing deflation in food items, a sharp fall in fuel inflation and some edging down of inflation excluding food and fuel contributed to the decline in headline inflation.”
The RBI has cut its estimates on inflation which marked off to 18th month low of 2.2% in December for next year, and expects the number to come at 2.8% in March quarter, 3.2-3.4% in first half of next fiscal and 3.9% in third quarter of Financial Year 2019-’20. Besides inflation, RBI expects GDP growth to be at 7.4% in FY 20, which is up from the 7.2% estimated for FY 19 by the finance ministry.
Also Read: Shaktikanta Das appointed new RBI Governor
Repo rate is the rate at which commercial banks borrow money from the RBI; while reverse repo rate is the rate at which RBI collects money from banks.