RBI cuts short term lending rates
Mumbai, Sep 29 (IANS) Springing a surprise, the Reserve Bank of India (RBI) on Tuesday cut its short-term lending rate by 50 basis points, but made a pitch for passing it on to consumers in the form of cheaper personal and commercial credit. Stakeholders expected a 25-basis-point cut. While the repurchase rate, or the interest charged on short-term borrowings, stands cut to 6.75 percent, it will take commercial banks to lower their own lending rates for personal, automobile, housing and commercial loans to also get reduced, translating into lower EMIs. The indexed reverse repo rate, or the interest payable by the central bank on short-term deposit, automatically stood reduced to 5.75 percent. There was no cut in the 4 percent cash reserve ratio that banks have to maintain in the form of liquid assets and designated government securities. "Markets have transmitted Reserve Bank's past policy actions via commercial paper and corporate bonds, but banks have done so only to a limited extent," Reserve Bank Governor Raghuram Rajan said in the fourth bi-monthly monetary policy statement for the current fiscal year.
