Take the pledge to vote

For a better tommorow#AajSawaroApnaKal
  • I agree to receive emails from News18

  • I promise to vote in this year's elections no matter what the odds are.
  • Please check above checkbox.


Thank you for
taking the pledge

Vote responsibly as each vote counts
and makes a diffrence


Issued in public interest by HDFC Life. HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (“HDFC Life”). CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101 . The name/letters "HDFC" in the name/logo of the company belongs to Housing Development Finance Corporation Limited ("HDFC Limited") and is used by HDFC Life under an agreement entered into with HDFC Limited. ARN EU/04/19/13618
LIVE TV DownloadNews18 App
News18 English
News18 » Business
2-min read

RBI Cuts Repo Rate by 0.25%, Loans Set to Get Cheaper

Trading at 5.90 percent, the one-year interest rate swap works out at 5.75 percent on a daily basis, putting it 50 basis points below the current repo rate.


Updated:April 4, 2019, 11:59 AM IST
RBI Cuts Repo Rate by 0.25%, Loans Set to Get Cheaper
A Reserve Bank of India (RBI) logo is seen at the gate of its office in New Delhi. (Reuters Photo)

Mumbai/New Delhi: The Reserve Bank of India (RBI) is likely to cut its policy interest rate by 25 basis points on Thursday, despite some analysts believing the country's weakening economic growth and subdued inflation outlook warrant a larger reduction.

The RBI's six-member monetary policy committee (MPC) began its three-day review on Tuesday, and most analysts expected it to take a cautious approach given uncertainty over who will lead the government after the coming election and what their fiscal policy will be.

Campaigning for votes, political parties have been promising dole-outs including direct cash payments to poor people if they win power, stoking potential inflation fears.

The inflation outlook could also be upset by the perennial risk of sharply higher food prices if the monsoon season rains disappoint.

With that in mind, more than 85 percent of the nearly 70 economists polled by Reuters expected the RBI to cut its benchmark lending rate, the repo rate, by 25 basis points to 6.00 percent on April 4.

Yet, India's debt market appear to have priced in a 50 basis-point cut.

Trading at 5.90 percent, the one-year interest rate swap works out at 5.75 percent on a daily basis, putting it 50 basis points below the current repo rate, according to rate derivative dealers.

"I think the RBI will be more cautious than what the market is expecting," said Abheek Barua, chief economist at HDFC Bank in New Delhi.

"We haven't fallen off the cliff yet for a 50 basis point cut," he said.

Whereas Prime Minister Narendra Modi's administration clashed with the RBI's previous leadership on several issues including rate cuts last year, relations improved after the government appointed Governor Shaktikanta Das in December.

Officials with knowledge of the government's thinking on monetary policy said there was no pressure on the RBI to make a sharper rate cut at this time, despite economic growth weakening to 6.6 percent in December quarter, its slowest in five quarters, and the unemployment rate hitting a multi-decade high.

"The mandate of the MPC is to focus on inflation and if inflation is below the target it should cut the rate," said an official privy to policy discussions.

"Ideally there is a scope for 50 basis point cut now, but one has to be careful of any upside risks to inflation as well," the official added.

Annual retail inflation was just 2.57 percent in February following five months of deflation in food prices, and the RBI has projected a rise to 3.9 percent by the end of December. But that could change quickly if the monsoon fails or global oil prices surge.

"We do not expect a drastic cut from the RBI, a calibrated approach would be our expectation, 25 basis points (bps) is more likely in our view. But, that is a call RBI has to take," said a second government official.

The MPC could be reluctant to make a deeper cut in any case, as banks only reduced their lending rates by a token 5-10 basis points after the RBI's last 25 bps cut in February.

"Savings growth has come down sharply and every bank is competing with another to attract depositors," said a top banker.

"Under such circumstance, we won't be able to lower deposit rates, and in that case there is no room to cut lending rates," he said, declining to be named due to sensitivity over relations with the central bank.

Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.

| Edited by: Ahona Sengupta
Read full article
Next Story
Next Story

Also Watch

Most Active
Company Price Change %Gain
Yes Bank 64.10 -1.54
Maruti Suzuki 6,095.05 -0.58
BPCL 382.10 3.62
HDFC 1,988.30 -0.40
Reliance 1,205.70 0.69
Company Price Change %Gain
Maruti Suzuki 6,093.55 -0.61
Yes Bank 64.10 -1.61
ICICI Bank 399.15 -0.36
HDFC 1,988.75 -0.39
Tata Motors 121.85 -0.08
Top Gainers
Company Price Change %Gain
Tata Steel 358.25 3.86
BPCL 382.10 3.62
Vedanta 149.70 2.96
JSW Steel 221.40 2.41
IOC 128.15 2.36
Company Price Change %Gain
Tata Steel 358.05 3.95
Vedanta 149.45 2.68
SBI 280.50 2.41
Bajaj Finance 3,415.05 1.47
NTPC 122.40 1.28
Top Losers
Company Price Change %Gain
Britannia 2,613.85 -2.92
Coal India 192.35 -2.66
ONGC 127.00 -2.08
Eicher Motors 16,030.40 -1.56
Yes Bank 64.10 -1.54
Company Price Change %Gain
Coal India 192.50 -2.58
ONGC 127.00 -2.08
Yes Bank 64.10 -1.61
Bharti Airtel 335.75 -1.21
HDFC Bank 2,186.95 -0.98

Live TV

Countdown To Elections Results
To Assembly Elections 2018 Results