EMIs Set to Get Lower as RBI goes for fourth straight rate cut


The Reserve Bank of India's Monetary Policy Committee (MPC) headed by Governor Shaktikanta Das today delivered its fourth repo rate cut in a row and maintained its accomodative stance. Reserve Bank's MPC cut repo rate, the key interest rate at which it lends short-term funds to commercial banks, by 35 basis points or 0.35 percentage points to 5.40 per cent, the lowest in over nine years. After the repo rate cut by the Reserve Bank of India loan equated monthly instalments (EMI) for home and other loan borrowers are set to come down, analysts said.

The decision of the monetary policy committee to cut repo rate was unanimous with four members voting to cut rate by 35 basis points while the rest voted for a 25 basis point rate cut.

In the three previous monetary policy reviews, RBI reduced the key policy rates by 25 bps each time. By adding this rate cut, in total, the central bank has reduced key policy rates by 110 bps. Post the policy announcement, the repo rate stands at 5.40 per cent down from 5.75 per cent. Similarly, reverse repo rate has also been reduced to 5.15 per cent from 5.50 per cent.

The last time the RBI made so many back-to-back cuts was after the global financial crisis over a decade ago, when most major central banks were desperate to revive economic growth. With today's rate cut the Reserve Bank of India has become the most dovish Asian central bank, according to analysts.