Raghuram Rajan says the big rate cut should not be viewed as Diwali present
Reserve Bank Governor Raghuram Rajan on Tuesday cut the benchmark repo rate by 50 basis points to a 4-1/2-year low of 6.75 per cent in a surprise move.
Hours after Dr Rajan's bigger-than-expected rate cut announcement, State Bank of India - the country's biggest lender - announced a 40-basis-point cut in its base rate with effect from October 5. SBI’s decision is likely to bring cheer to millions of home loan consumers.
Other lenders are expected to follow suit after RBI’s sharp repo rate cut, analysts say.
Dr Rajan had earlier said that he will work with the government to ensure that the repo rate cut is transmitted to the economy.
"While the Reserve Bank's stance will continue to be accommodative, the focus of monetary action for the near term will shift to working with the government to ensure that impediments to banks passing on the bulk of the cumulative 125 basis points cut in the policy rate are removed," Dr Rajan said.
Tuesday's repo rate cut is the biggest single monetary policy move taken by Dr Rajan and it takes the repo to its lowest since March 2011. ('I Do What I Do': Top 5 Raghuram Rajan Quotes)
The repo rate cut decision came in for praise from policymakers, including Finance Minister Arun Jaitley, who said that that transmission of RBI rate cuts by banks will boost investments.
Dr Rajan said the 50-basis-point repo rate cut should not be viewed as an aggressive move. Many conditions laid down by the RBI in the previous policy announcement in August have been met, paving way for a sharper rate cut, he added.
"I don't think we were excessively aggressive... it's not a Diwali present," he said. (Read)
Hours after Dr Rajan's bigger-than-expected rate cut announcement, State Bank of India - the country's biggest lender - announced a 40-basis-point cut in its base rate with effect from October 5. SBI’s decision is likely to bring cheer to millions of home loan consumers.
Other lenders are expected to follow suit after RBI’s sharp repo rate cut, analysts say.
Dr Rajan had earlier said that he will work with the government to ensure that the repo rate cut is transmitted to the economy.
"While the Reserve Bank's stance will continue to be accommodative, the focus of monetary action for the near term will shift to working with the government to ensure that impediments to banks passing on the bulk of the cumulative 125 basis points cut in the policy rate are removed," Dr Rajan said.
Tuesday's repo rate cut is the biggest single monetary policy move taken by Dr Rajan and it takes the repo to its lowest since March 2011. ('I Do What I Do': Top 5 Raghuram Rajan Quotes)
The repo rate cut decision came in for praise from policymakers, including Finance Minister Arun Jaitley, who said that that transmission of RBI rate cuts by banks will boost investments.
Dr Rajan said the 50-basis-point repo rate cut should not be viewed as an aggressive move. Many conditions laid down by the RBI in the previous policy announcement in August have been met, paving way for a sharper rate cut, he added.
"I don't think we were excessively aggressive... it's not a Diwali present," he said. (Read)
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