RBI lowers the rate for Home and Consumer loans

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:

1. The RBI is said to be under increasing pressure both from industry and government to lower rates.
2. Inflation rate has been lowered down
3. Crude oil and commodity prices have fallen considerably.

Effects of the cut:

1. Decrease in EMI for home loans
2. Banks will benefit as the value of their bond portfolio will rise
3. Companies will benefit as interest costs decrease
4. Improvement in the market sentiment will enable companies to raise money.