RBI Surprises Repo Rate Cut, EMIs likely to come down

Cheering the market, the Reserve Bank of India on Thursday announced cut in its repo interest rate by 25 basis points to 7.75 per cent. This was the first cut in a year and the move came at a time when economy was hinting soar powered by slowing inflation and controlled fiscal deficit.

The market welcome the news with Sensex moved 600 points to 27,947 and Nifty was up by 50 points to over 8,450.

With this unexpected announcement, RBI brought respite to borrowers as  commercial banks were  expected to announce cut in the  EMIs for loans.

The RBI in a statement said, lower-than-expected inflation, weak crude prices and weak demand, “have provided headroom for a shift in the monetary policy stance.”

Government’s commitment to control fiscal deficit target is another reason for the central bank to announce the reduction much before February budget.

The RBI also said that it could further cut interest rates if inflation continued to slow down, and government’s progress on fiscal consolidation remained focused.

(With additional input from NDTV)

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About Neha Chandra

Neha Chandra reports on the international affairs as well as she writes on military issues and national security.