For the first time in almost two years, Reserve Bank of India governor Raghuram Rajan cut key interest rates by 25 basic points.
As a result of this move, home and consumer loan rates are set to fall.
Reasons behind the cut:
- The RBI is said to be under increasing pressure both from industry and government to lower rates.
- Inflation rate has been lowered down
- Crude oil and commodity prices have fallen considerably.
Effects of the cut:
- Decrease in EMI for home loans
- Banks will benefit as the value of their bond portfolio will rise
- Companies will benefit as interest costs decrease
- Improvement in the market sentiment will enable companies to raise money.
