Home, auto and other loans may cost less as the Reserve Bank of India (RBI) on Thursday cut interest rates for the third time this year to their lowest level in nine years and signalled more easing in a bid to support an economy growing at the slowest pace since the BJP first came to power in 2014.
The RBI cut the repo rate by 25 basis points to 5.75 percent and reverse repo rate by an equal proportion to 5.50 percent and expected banks to transmit these to home, auto and other loan borrowers faster.
With all the six members of the Monetary Policy Committee (MPC) voting unanimously for a rate cut and switching of its stance to "accommodative" from neutral, RBI governor Shaktikanta Das said the shift in the stance meant that an increase in interest rates is "off the table."
He wanted banks to expedite the transmission of the current reduction in rates as well as similar ones that happened in February and April. "Our decision is driven by growth concerns and inflation concerns, in that order," Das told reporters here. "The unanimous vote reflects the resolve of the monetary policy committee to act decisively and act in time (to address the growth concerns)."
In three back-to-back bi-monthly monetary policies this year, the RBI has lowered interest rates by 75 basis points (0.75 percentage point). With India's GDP growth slipping to a five-year low of 5.8 percent in the January-March quarter -- the first instance of growth falling below China's in last few quarters -- the RBI lowered its growth forecast for the economy to 7 percent from the April view of 7.2 percent for the 2019-20 April-March fiscal year.
"Growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy," the RBI said in the monetary policy statement.
CNBC-TV18's Latha Venkatesh is in conversation with Rajiv Anand, executive director - wholesale banking, Axis Bank; B Prasanna, head - global markets, ICICI Bank; Pranjul Bhandari, chief India economist, HSBC and Arijit Basu, managing director, SBI to discuss RBI’s policy.