RBI may further slash repo rate by 25 bps!!

Moratorium BenefitsThe Reserve Bank of India, which last month surprised by a rate cut of 25 bps in the repo rate, RBI may further slash the repo rate by 25 bps this week to boost growth. The decision would be made after considering inflation trends and checking the country’s fiscal situation.

On Tuesday, February 3, the Authority will conduct its sixth bi-monthly monetary policy review, 2014-15, and bankers and economists have high hopes of the same. After the government garnered a record sum of over Rs 22,000 crore by disinvesting a 10 percent stake in CIL, the CIL disinvestments have also eased the fiscal deficit concerns. With further disinvestment, the economic situation is expected to improve further, thus impacting the rate cut decision. Although the industry was not satisfied with the rate reduction in the last few months, analysts have predicted a rate reduction of up to 1 percent in the coming months. If rates drop by 1%, using loans would become a lot simpler, and for ongoing home loans (floating interest rates), the monthly EMI will see a drop of around 15 percent. It will be a lot easier to not only take the current loan but also take a new loan.

This has been a subject of discussion, where at least by the end of this year, 80 percent of the total banks do not expect a rate drop, but the industry hopes and wants the expert’s prediction to come true. After having faced a lot of criticism for maintaining a highly hawkish monetary posture, the decision may help RBI Governor Raghuram Rajan enjoy appreciation.

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