Oct 21, 2008

India - Repo rate cut,home loans may get cheaper

Mumbai: After shoring up the banking system with Rs. 1,45,000 crore funds, the Reserve Bank on Monday paved the way for cheaper home, consumer, corporate and personal loan rates by slashing its key short-term lending rate (repo) by 100 basis points.

The cut in repo, the first since 2004, would allow banks to immediately borrow short-term funds from the apex bank at a cheaper eight per cent as against nine per cent till now.

Finance Minister P. Chidambaram told reporters in New Delhi that this move “will enthuse investors to continue to take forward their investment proposals.”

“It is a welcome step and clearly shows that the interest rate regime is now on a descent curve,” HDFC Bank’s Deputy Treasurer Ashish Parthasarathy told PTI here.

Earlier, the RBI cut the mandatory cash deposits that banks must keep with it (CRR) by 250 basis points after five years, along with other measures.

“It is a pro-growth measure,” IDBI Bank’s Chairman and Managing Director Yogesh Agarwal said. While the CRR cuts stopped rates from moving upwards, the repo rate cut could see a softening of deposit and lending rates, Mr. Parthasarathy said. —PTI

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