RBI cuts repo rate again; urges banks to lower lending rates

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Posted on 17 January, 2016

Immediately after the announcement, the BSE Sensex shed over 700 points, as the markets had already factored in the 25 basis points cut. Rajan defended the smaller cut by saying, “The RBI is not a cheerleader. There are other people in the economy who can play the role of the cheerleader. Our job is to give people confidence in the value of the rupee, in prospects of inflation, and having established that confidence, create longer term framework for good decisions to be made. Every time an exporter comes to me and says that stability has been very valuable for us to make decisions, that reinforces my view that these are our main roles, not to act as booster shots or cheerleaders.” He has also urged the banks to pass on the benefits of this cut to their customers. “Banks should pass through the sequence of rate cuts into lending rates,” said the governor. This could essentially translate into cheaper home loan EMIs for those have opted for home loans. Only recently did the banks start lowering their rates based on the previous rounds of cuts. Whether this rate cut and the governor’s words will have any bearing on the banks, only time will tell.