In his first rate decision, new RBI chief Urijit Patel cut the repo rate from 6.50 per cent to 6.25 per cent. This 0.25 per cent cut takes the rate to a six-year low.
Repo rate is the rate at which banks borrow from the RBI. Since their rate has come down, the rate cut will be passed on to the customers – which is you.
Technically, this is going to help bring the rates of home loan, car loan and corporate loan down as banks will now lend money at a lower rate. And if this rate keeps falling then the total benefit to the borrower will be huge.
It is also the first time that such a decision has been taken by a newly formed six-member panel called the Monetary Policy Committee or MPC. All six members agreed on the rate cut.
“The committee expects that the strong improvement in sowing, along with supply management measures, will improve the food inflation outlook. The government has announced several measures to cool food inflation pressures, especially with regard to pulses,” the RBI said in a statement. The former RBI governor Raghuram Rajan was often accused by markets of not going for rate cuts and thereby hampering growth.