RBI cuts rates to 9-year low, NEFT charges go

Mumbai

Home, auto and other loans may cost less as the Reserve Bank of India today lowered key interest rates for the third time this year to a nine-year low in order give a boost to a slowing economy.

The central bank’s Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, took a unanimous decision to lower the repo rate, or the rate at which the RBI lends to commercial banks, by 25 basis points or 0.25 per cent to 5.75 per cent.

The reverse repo, or the rate at which the central bank borrows from the commercial banks, was also lowered to 5.5 per cent. Speaking to mediapersons after the announcement, Das urged the banks to pass on the rate cuts to borrowers. The RBI hoped that lending institutions would reduce equated monthly instalments (EMI) for home, car and other loans.

The Governor later added that the six-member committee changed the central bank’s policy stance to “accommodative” from “neutral”.

The MPC in its commentary said it projected India’s economic growth at 7 per cent, lower than the 7.2 per cent projection made in April.

“Global economic activity has been losing pace after a somewhat improved performance in Q1, reflecting further slowdown in trade and manufacturing activity,” the committee’s statement said. The MPC also raised the forecast for retail inflation marginally to 3 per cent to 3.1 per cent for April-September 2019 as against its previous forecast of 2.9 per cent to 3.0 per cent. Das said the RBI was closely monitoring the developments in the non-banking financial companies and housing finance companies sectors, which were reeling under the troubles faced by DHFL.

Sensex down 500 pts

A lesser-than-expected lending rate cut along with no announcements on new measures to boost liquidity for the non-banking financial companies (NBFCs) sector disappointed the investors and pulled Sensex down by more than 500 points.

What’s for borrowers

They can expect more rate cuts, as monetary policy stance has changed from ‘neutral’ to ‘accommodative’. EMIs on home loans may come down if banks decide to lowers rates

NPA norms in 3-4 days

RBI will issue new guidelines for bad loan resolution, replacing Feb 12 circular quashed by the SC, within next three-four days

No fund transfer levy

RBI has done away with charges on RTGS and NEFT fund transfers

CURRENT CHARGES

RTGS Rs 30-55

NEFT Rs 2-25

Growth forecast down

7% is revised growth forecast from earlier 7.2% for 2019-20

3-3.1% new retail inflation forecast for April-Sept against 2.9-3%