Kolkata: RBI is widely expected to announce a 25 basis point rate cut today when governor Sanjay Malhotra will announce the decision of the Monetary Policy Committee meeting. Almost all economists in the country have expressed the view that the RBI will take this decision that can lead to a trimming of interest rates on all types of loans in the country.
If the RBI boss indeed makes the announcement of having 25 basis points of the Repo Rate which now stands at 6.25%, he will firmly set the interest rate on a downcycle in the country. The first cut of 25 basis points was taken in the February 7 meeting on April 9, which was also Malhotra’s first MPC meeting as the governor after his predecessor was prevented from exercising the scissors due to the glare of inflation, especially food inflation.
EMIs likely to go down
The February rate cut saw a number of prominent banks in the country trim retail lending rates. These included the country’s largest bank SBI, PNB, Union Bank, Canara Bank, Bank of Maharashtra. Many think those banks that haven’t yet cut rates will be forced to do so after Wednesday’s cut. In fact, there will be at least two more cuts this FY, a report by SBI Research has said. It has predicted that the total rate cut will touch 100 basis points by March 2026. As a result, personal loans, home loans, car loans and education loans are expected to become cheaper across the board for both banks and NBFCs.
The rate cuts will in fact complement the Centre’s efforts to raise consumption levels in the country. Private consumption has been quite lukewarm in the country that was substantially responsible for lack of private sector capex, lackluster employment generation and lock of consumer confidence. All this also showed on the slackening pace of growth. The Centre tried to tackle it by announcing big income tax relief this year and the RBI also chipped in with the rate cut in February.
Cooling inflation
Declining inflation will also help the RBI go for rate cuts and boost growth. The SBI Research report has also stated that inflation could cool this FY, if a scorching summer doesn’t trigger food inflation. “CPI inflation may come down to 3.8% in Q4 FY25 and average to 4.6% in FY25… Average CPI inflation may come to 3.9-4.0% in FY26 and core inflation should come around in the range of 4.2-4.3%…vigil warranted on food inflation with a likely heat wave unfolding,” mentioned the SBI Research report.
If a 25 basis point rate cut takes place it would be the second such move this year which is expected to directly make retail credit cheaper and fuel consumption in the country and boost growth. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
