Cheap loans likely as RBI cuts rate after GST

Mumbai: Loans are likely to become cheaper as the Reserve Bank of India (RBI) on Wednesday slashed the repo rate by 25 basis points (bps) to 6 per cent, the lowest since November 2010 in view of the recent slump in consumer price inflation (CPI).

The sharp fall in the prices of food articles led to June CPI slipping to a five-year low of 1.5 per cent, way below RBI’s long-term target of 4 per cent and its April-September projection of 2-3.5 per cent.

“These factors along with the normal and well distributed normal rainfalls and the smooth roll out of the GST has opened up the space of monetary policy accommodation,” RBI said.

Four members of the RBI’s Monetary Policy Committee voted to cut rates by 25 bps, while one voted for a 50 bps cut and one voted for leaving rates unchanged. The next meeting of the MPC is scheduled on October 3 and 4, 2017.

Industry experts said the repo rate cut is not likely to immediately result in lower lending rates for final consumers as some of the banks are borrowing less under the repo window due to surplus liquidity.