Home, auto loans set to be cheaper as RBI Governor Shaktikanta Das cuts interest rates by 0.25%

New Delhi: RBI Governor Shaktikanta Das cut the interest rate by 0.25 percent to 6.25 percent, a move that will lead to reduction of lending rate by banks leading to lower EMI for housing, car loan and corporate borrowers.

This is Das' first monetary policy review after taking charge as the RBI Governor, replacing Urjit Patel.

The 6-member Monetary Policy Committee (MPC), headed by Patel, reduced repo rate or the short term rate at which central bank lends to banks, to 6.25 percent. Consequently, the reverse repo rate has also come down by a similar percentage point to 6 percent. The MPC voted 4:2 in favour of the rate cut, while the decision to change policy stance was unanimous.

The central bank also changed its monetary policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening on its approach towards interest rates.

The RBI cut its estimates on headline inflation which cooled off to a 18-month low of 2.2 per cent in December for the next year, and expects the number to come at 2.8 per cent in March quarter, 3.2-3.4 per cent in first half of next fiscal and 3.9 per cent in third quarter of FY20.

Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted for status quo in interest rates, while Das and three others voted for a cut in interest rates.

The RBI had maintained status quo on the key lending rate (repo) in its last three bi-monthly policy reviews after raising the rate twice by 25 basis points each in the fiscal.

Das, in his maiden monetary policy review, has moved away from the usual practice of announcement 2:30 pm. Earlier, when Urjit Patel took charge as the RBI Governor, he shifted from the usual practice of announcement at 11 am and presented the fourth bi-monthly (his maiden) monetary policy review at 2:30 pm after the MPC meeting.

With PTI Inputs