RBI cuts Repo rate

RBI cuts Repo Rate by 6.25%: Amidst of slow growth rate and high inflation, to bring down the situation under the standards, Reserve Bank of India has announced some measures related to the nation’s economy. A surprising step by RBI has however brought a positive impact on share market immediately.

The rupee also gained strength and stood at 6.40 against the dollar. The decision to cut down the Repo by 0.25% is the biggest and sudden surprise before the festival.Reserve Bank of India Governor, Urjit Patel at a news conference in Mumbai has announced the rate cut.

What is REPO rate?

Repo rate is the rate of interest at which the banks in India borrow from the RBI whereas the Cash Reserve Ratio (CRR) remains unchanged. CRR refers to the amount parked mandatorily with the RBI. Six-member panel in the RBI has taken the unanimous decision to cut the rate.Repo rate cut is directly related to the loaning interest rate to customers.

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The lending rates are also to be cut down following this impact. At present, the repo rate stands at 6.25% after the decline from 6.50%. The present rate is the six years lowest figure.

The loans are at present stand between 9% – 9.5% for customers. Home and vehicle loans will now become cheaper. The Every Month Installment (EMI) will also come down as the interest rates have been lowered.

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Present and future interest are anyways will be effective as per the rate announced by the banks after the repo rate decrease. The previous loans can also be revived and opted by the consumers based on the calculations of the bank.

For the past one and half year that is from January 2015, RBI has cut down the Repo rate six times to control the inflation growth in India. Food inflation is the key factor. Future analysis of Gross Domestic Products (GDP) is also dependent on the Repo rate. Hence to have a flourishing economy, RBI is taking all the measures possible.