RBI Cuts Repo Rate for third time in 2019 : Loans may get cheaper

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NEW DELHI: For the third time in a row, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) today cut interest rates by 25 basis points, as was widely expected.
At the end of a three-day MPC meeting, RBI Governor Shaktikanta Das announced its second bi-monthly monetary policy statement for 2019-20. In a unanimous decision, the MPC also decided to change the stance of monetary policy from neutral to accommodative.
Amid slowing economic growth and rising global uncertainty, the RBI had decreased the short-term lending rate (repo rate) by 25 basis points each in its last two policy reviews.

Top highlights from RBI's monetary policy:

Sovereign bonds rallied in India, sending benchmark yields to their lowest since November 2017, after the central bank cut its key rate and left the door open for more policy easing to shore up a sagging economy. The rupee held losses, while stocks extended declines.
-Home and car buyers would be hoping for cheaper loans from banks after the Reserve Bank of India today cut key policy rates for the third time in a row.

-A reduction in policy rates will come with a reduction in market yields even if the transmission to the real economy via lower lending rates from the banking system may take some time.

-"Low inflation and subdued growth are the drivers of the move. Yet, the real concern is lack of transmission of rate cuts into effective lending rate. Liquidity conditions also remain tight for large part of the corporate sector. Effective transmission and adequate liquidity remain key challenges": Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers.



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