The Reserve Bank of India (RBI) has reduced the repo rate by 0.50% to 5.50%. This means that loans will be cheaper in the coming days. Borrowers' EMI will also decrease. This reduction will give a benefit of about Rs 1.48 lakh on a 20-year loan of Rs 20 lakh.
RBI Governor Sanjay Malhotra gave information about the decisions of the Monetary Policy Committee meeting on June 6 at 10 am. This meeting started on June 4. The rate at which RBI gives loans to banks is called repo rate.
In the meeting held in February this year, the interest rates were reduced from 6.5% to 6.25%. This reduction was done by the Monetary Policy Committee after about 5 years.
Then in the meeting held in April also the interest rate was reduced by 0.25%. Now the rate has been reduced for the third time. That is, the Monetary Policy Committee has reduced the interest rate by 1% in three times.
Banks also reduce their interest rates after reduction of repo rate
After the reduction of repo rate, banks also reduce their interest rates on loans like housing and auto. If interest rates are reduced, then housing demand will increase. More people will be able to invest in real estate. This will give a boost to the real estate sector.
Reduction in CRR
RBI Governor Sanjay Malhotra said that it has been decided to reduce the Cash Reserve Ratio (CRR) by 1% from 4.00% to 3.00%. He said that with this move of RBI, Rs 2.5 lakh crore will come into the financial system.
CRR is the money that banks have to keep a part of their total deposits with the Reserve Bank of India (RBI). With this, RBI controls how much money will remain in the market. If CRR is reduced, then banks have more money to give loans, like this time a 1% reduction will bring Rs 2.5 lakh crore rupees into the system.
Prakash Kumar Pandey