The Reserve Bank of India (RBI) can once again give relief news to the common people! In a Reuters survey,economists have predicted that the Reserve Bank may soon cut interest rates. According to the survey,the Reserve Bank may reduce the repo rate by 25 basis points in the meeting to be held in April. After this,another cut is also likely in August. If this happens,it will be the shortest cycle of interest rate cuts,which will give great relief to loan takers and EMI payers. So let us know the reasons behind this possible cut and what will be its effect on the common man.
Strong possibility of an interest rate cut in April
Most economists have predicted this in a Reuters survey. In this survey conducted between 18 and 27 March,54 out of 60 economists believe that the Reserve Bank can cut its benchmark repo rate by 25 basis points to bring it to 6%. This cut can be done after the meeting to be held between 7 and 9 April. That is,the Reserve Bank may announce a cut in interest rates on April 9. This news has brought a big hope for those who are troubled by expensive loans and EMIs.
Reduction in inflation is a big reason
Inflation in India has come down to 3.61% in February,which is the lowest in the last seven months. Apart from this,the growth rate of the economy is estimated to be 6.4% in this financial year,which is the lowest in the last four years. Given the reduction in inflation and slow economic growth rate,the Reserve Bank has a good opportunity to cut interest rates. Reduction in interest rates will increase the flow of cash in the market and encourage economic activities.
A total cut of 75 basis points is possible
No major change in interest rates is expected until the first half of next year. A total of 75 basis points can be cut in this entire cycle. In this way,this will be the shortest cycle of interest rate cuts since the early 2000s. It was only in the early 2000s that the RBI started using the repo rate as its main policy tool. This potential reduction in interest rates may be small,but it can provide great relief to the common man.
Interest rates were also reduced recently
The Reserve Bank had also cut interest rates on February 7 last month. The central bank had announced a reduction of 25 basis points in the repo rate after the Monetary Policy Committee (MPC) meeting. With this cut,the repo rate came down from 6.50% to 6.25%. After April,the next 25 basis point cut may happen in August. In this way,the RBI is actively using monetary policy to control inflation and accelerate economic growth.
How will the common man benefit from the reduction in the repo rate
The repo rate is the rate at which the RBI lends to banks. Reduction in interest rates not only makes the loan cheaper but also reduces the burden of EMI. If the Reserve Bank cuts the interest rates again,the common man will get some relief from inflation. At the same time,those who want to take a loan will also be able to get a loan at a lower interest rate,which can increase the number of loan takers and boost economic activities. This step can prove to be important in reducing the financial burden of the common man and accelerating the economy.
