Video Editor: Vivek Gupta
The slowdown of the economy became a hot topic of discussion after the 2019 elections. People were anticipating what would be the new government and the RBI do regarding this. Now, the Reserve Bank of India has made its first move by slashing the repo rate. The government showed that it is more worried about the slow growth in economy than the rising inflation. The RBI has cut 25 base points in repo rate. Now, it has become 5.75 percent.
The RBI has made it clear that this rate will not just increase, but can also be reduced if necessary.
What Will Be the Impact on Common People?
Reduction in EMI will be a direct benefit. The last time a rate cut was done, banks did not transmit interest rates immediately. Therefore, RBI governor Shikkantant Das has clearly asked the banks to speed up and transmit more. We can assume that this reduction will be quicker in government banks, but private banks may take some time. It should be noted that the deposit rate may decline too with the decrease in EMI. Deposit Rate is the rate which earns interest.
What Will the Banks Do?
It is possible that new borrowers will get a discount, but it may not apply to older borrowers.
Stakeholders are tracking the RBI for liquidity crisis in the market. The credit should be increased in order to increase growth, but everybody wants to know what is the RBI signalling at. On this, the RBI says that they will not let a liquidity deficit to happen in the market.
Last year, a circular was released which said banks were asked to be strict with the new NPAs, especially the Power Sector NPA, but that circular was postponed. Now, the RBI will soon bring that circular with some modifications . In the coming days, we can see some more big announcements.
There are indications of reducing ATM charges and transaction charges too.
At present, India's concern is development and job. The Modi government has formed two cabinet committees and its focus is on that. With the latest decision, the RBI has cleared the situation. Although the stakeholders may not consider it negative, their enthusiasm has not increased. There is a lack of stability and liquidity in the market right now. Now, the markets and the country have great expectations from the Budget coming out on 5 July.
(This story was originally published on Quint hindi)
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