Even though the
Reserve Bank of India (RBI) did not cut the repo rate in the monetary policy, it has made loans to home, auto and small businesses cheaper. CNBC-TV18's Latha Venkatesh explains.
Firstly, RBI abolished the daily variable reverse repo, which used to be around 5.15 percent. The central bank further added that every reporting Friday, they will conduct a 14-day variable repo and a reverse repo. The RBI retains daily fixed rate reverse repo at 4.90 percent.
It is likely that banks with excess cash will dump part of the money at daily 4.9 percent window and part at 14-day window of 5.15 percent. So, banks are likely to bring down the deposit rate and consequently, the lending rates as well.
It also announced that every additional auto loan, home loan or MSME loan that they give, that amount will be deducted from their deposits, and only on the balance they have to keep CRR and the banks may pass on the advantage to borrower and so there could be cut in auto, home and MSME loans.
The Reserve Bank said that it is going to announce one-year repos and three-year repos. So banks can borrow from RBI for a period of three years at today’s repo rate of 5.15 percent.